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The Corporate Transparency Act: Big Updates for Small Businesses

by | Jan 9, 2024 | Small Business |

What is the Corporate Transparency Act?

The Corporate Transparency Act (CTA), was passed by Congress in 2021, and went into effect January 1, 2024. Its purpose is to promote transparency in entity structures and ownership, and to combat money laundering, and tax fraud. It is designed to capture more information about the ownership of specific entities operating in or accessing the U.S. market.

Does my company have to report?

Any entity that is considered a “Reporting Company” must file. “Reporting Companies” are domestic corporations, limited liability companies, limited liability partnerships, or any other entities created by filing a document with a secretary of state or similar office under state or tribal law.  We may have formed this type of business entity for you.

What information does my company need to report?

Beneficial owners of reporting companies will first need to be established based on the criteria set forth by the Financial Crimes Enforcement Network – known as FinCEN. Reporting companies will then need to disclose information about these individuals, such as name, date of birth, address, unique ID number, and image, as well as the entity’s name, address, formation jurisdiction and tax identifier.

What is a Beneficial Owner?

Beneficial Owners are the people who have control over the company, or own at least 25% of the company’s ownership interests. This means that a company may have more than one Beneficial Owner.

When should I report?

On January 1, 2024, FinCEN began accepting Beneficial Ownership Information (BOI) reports. Filing deadlines are based on the company’s formation date. Newly formed entities must submit their BOI within 90 days of formation, while companies registered before January 1, 2024 have until December 31, 2024 to report their BOI.

What happens if I don’t report?

Willful failure to report, or providing false information, can lead to severe civil or criminal penalties, including daily fines or imprisonment. Senior officers may be held accountable for their company’s non-compliance. Penalties also apply for intentionally causing a company to fail in its reporting obligations or for providing false information. There is a safe harbor from penalties for voluntarily correcting inaccurate reports within 90 days of the original deadline.

What to do?

At rb LEGAL, LLC, we’re here to guide you through the process of filing with FinCEN so you can focus on what’s most important: running your business. Call or text us today at (763) 582-1414, or reach out online at [email protected].