The Corporate Transparency Act – Is Your Business Compliant?
The Corporate Transparency Act (“CTA”), enacted in 2021, was passed to combat illicit activities such as money laundering, tax fraud, and terrorism financing. It targets the concealment of beneficial ownership of U.S. entities, a practice Congress sees as a threat to national security.
Under the CTA, many US entities must file a Beneficial Ownership Information Report (“BOIR”) with the Financial Crimes Enforcement Network (“FinCEN”). This requirement extends to millions of businesses nationwide. Filing the BOIR is free, however, and the submitted information will not be made publicly available.
Who Does the CTA Apply to?
The CTA’s new reporting mandate applies primarily to LLCs, corporations, and similar entities that are registered with a state. However, some businesses are exempt from reporting. Those exemptions include:
- Banks
- Domestic governmental authorities
- Insurance companies
- Issuers of securities
- Entities considered inactive before January 1, 2020
- Highly regulated businesses such as large operating companies that meet certain employee and revenue thresholds.
- Publicly traded companies
- Tax-exempt entities
If you are unsure if your business is subject to the CTA, you should seek guidance from an attorney.
What Does the CTA Require?
Entities subject to the law must file a BOIR with FinCEN. A “beneficial owner” under the CTA means any individual who, directly or indirectly, either:
(1) exercises “substantial control” over the company, such as a senior officer, or
(2) owns or controls at least 25% of the “ownership interests” of the company.
The filing must include:
- The entity’s name (including any trade names or “doing business as” names).
- The entity’s address for its principal place of business.
- The entity’s Tax ID number (EIN).
- The location of formation (United States, New York, for example).
- The entity’s current US Address.
- For each person that is a beneficial owner you must provide the following information:
- Their complete legal name.
- Their date of birth.
- Their residential address.
- A copy of an acceptable photo ID.
- For an entity created in 2024 and onwards, additional information needs to be provided about the individual who formed the entity.
Going forward, if there is a change to any of the required information you provide on the BOIR, you will have 30 days to submit an updated BOIR. The filings can be made electronically on the FinCEN website.
CTA Compliance Deadlines
If your entity was created before January 1, 2024, you have until the end of 2024 to file the report. Entities created in 2024 have a much shorter timeframe to submit the report, just 90 days, while entities created after 2024, only have 30 days to comply.
What Happens if You Do Not Comply?
Failure to comply, including not filing the BOIR or submitting incorrect or incomplete information, may result in fines of up to $500 a day for entities subject to the CTA. Willful or fraudulent non-compliance could also incur criminal penalties.
Schroon Law Can Help with CTA Compliance
Companies subject to the CTA should take steps to ensure ongoing compliance including:
(1) Determine if they are reporting companies.
(2) Identify their beneficial owners.
(3) Develop reporting systems for gathering, maintaining, and monitoring beneficial ownership information.
(4) Gather the required information from their beneficial owners.
Unsure about whether the CTA applies to your company? Questions about submitting your BOIR? Schroon Law can help.
