- The Corporate Transparency Act is new legislation that was passed by Congress to combat money laundering and terrorist finance.
- By December 31, 2024, many entities will need to file a Beneficial Ownership Information Report (BOIR).
- If you are unfamiliar or need help, please contact us and we will guide you through the process.
At the beginning of the year, there was a lot of hoopla and frustrating about the Corporate Transparency Act (CTA) – including in this blog. Since then, though, it seems like the CTA has slipped a lot of people’s minds.
As you probably recall, the CTA is a significant piece of legislation aimed at combating financial crimes like money laundering and terrorist financing. This act, signed into law in January 2022, mandates that certain types of corporations file an initial report with the Financial Crimes Enforcement Network (FinCEN) within a specific timeframe. Well guess what? That deadline is coming fast. So let’s talk about it.
What is the Corporate Transparency Act?
At its core, the CTA requires “beneficial ownership information” to be reported for corporations, limited liability companies (LLCs), and certain other entities. “Beneficial ownership” specifically refers to individuals who ultimately control a company, even if they don’t hold a formal title. This information is intended to shed light on the true owners of businesses, allegedly making it more difficult for criminals to use corporations as fronts for illicit activities.
Who is Affected by the CTA?
The CTA applies to a wide range of entities, including:
- Corporations formed under U.S. law
- Limited liability companies (LLCs) formed under U.S. law
- Certain foreign corporations operating within the United States
However, there are some exemptions, such as nonprofit organizations, banks, and credit unions. Basically entities that already are required to report this information to the government are exempt from this act.
What Information is Required?
The initial report required by the CTA includes the following information for each beneficial owner:
- Legal name
- Date of birth
- Residential address
- Country of citizenship or residence
- Picture of driver’s license or other form of identification
One tip – if you have a number of entities for which you are a beneficial owner, it will be easier if you get a FinCEN ID. This is relatively easy to do and then, when filing your BOIR, instead of uploading all of the information again, you only need to enter your identification number.
When is the Deadline?
The deadline for filing the initial report under the CTA depends on when the entity was formed or registered:
- Entities formed or registered before January 1, 2024: The deadline is December 31, 2024.
- Entities formed or registered on or after January 1, 2024: The deadline is 14 days after formation or registration.
As you can see, therefore, the deadlines are coming up fast.
Potential Penalties for Non-Compliance
Failure to comply with the CTA can result in significant penalties. The Act authorizes fines of up to $10,000 per day for non-compliance, and these fines can accumulate over time. Additionally, individuals who knowingly provide false or misleading information can face criminal penalties, including imprisonment.
What Steps Should Businesses Take?
As the deadline for CTA compliance approaches, businesses should take proactive steps to ensure they are in full compliance. This may involve:
- Identifying beneficial owners
- Collecting necessary information
- Preparing and filing the required report
- Developing procedures for ongoing compliance
It can also make a lot of sense to talk to a lawyer to understand their specific obligations under the CTA and to develop a compliance strategy.
The Corporate Transparency Act represents a significant step forward in the fight against financial crime. By requiring the disclosure of beneficial ownership information, the CTA aims to make it more difficult for criminals to exploit corporations for illicit purposes. As the deadline for compliance draws near, businesses should be aware of their obligations and take appropriate measures to ensure they are in full compliance with the law.
We are doing this for both us and ourselves. So if you have any questions or need help, please do not hesitate to reach out.
