The Corporate Transparency Act (“CTA”), which went into effect on January 1, 2024, introduces new federal reporting requirements for many businesses operating in the United States. The CTA aims to combat money laundering, terrorist financing, corruption, and tax fraud by requiring companies to disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Here’s what you need to know to ensure your business complies with the new regulations.

Who Must Report?
Most corporations, limited liability companies (LLCs), and other similar entities formed or registered to do business in the U.S. are considered “reporting companies” under the CTA. This includes both domestic and foreign entities. However, there are 23 types of entities exempt from reporting, such as publicly traded companies, banks, insurance companies, and large operating companies with more than 20 full-time employees, over $5 million in gross receipts, and a physical presence in the U.S.

Reporting Deadlines
The CTA has established the following reporting deadlines for companies subject to the new beneficial ownership disclosure requirements:

  • Existing companies formed before January 1, 2024, have until January 1, 2025, to file their initial report.
  • New companies formed on or after January 1, 2024, must file within 30 days of formation or registration (FinCEN has proposed extending this to 90 days).
  • Updated reports must be filed within 30 days of any changes to the previously reported information.

Information to Report
Reporting companies must submit information about the company itself (legal name, trade name, business address, jurisdiction of formation, and tax ID number) and its beneficial owners. Beneficial owners are individuals who, directly or indirectly, either exercise substantial control over the company or own or control at least 25% of its ownership interests. For each beneficial owner, the company must report their full legal name, date of birth, current residential or business address, and a unique identifying number from an acceptable document (e.g., passport or driver’s license).

How to Report
FinCEN has launched a secure online platform, the Beneficial Ownership Secure System (BOSS), for companies to submit their reports electronically. Reports are filed using a downloadable, fillable PDF format.

Penalties for Non-Compliance
Failure to comply with the CTA’s reporting requirements can result in significant civil and criminal penalties. Civil penalties can reach $500 per day, up to $10,000, while criminal penalties may include fines up to $10,000 and imprisonment for up to two years.

Next Steps for Your Business
To ensure your business complies with the CTA’s reporting requirements, consider taking the following steps:

  1. Determine whether your company is a reporting company or qualifies for an exemption.
  2. If your company is subject to reporting, identify your beneficial owners and gather the necessary information.
  3. Establish processes to monitor changes in ownership or control that may trigger the need for an updated report.
  4. File your initial report by the appropriate deadline and submit any necessary updates within 30 days of changes.

Given these developments, it’s understandable if you have questions about how this affects your business. We are here to ensure you remain informed and compliant, regardless of the legal shifts. If you would like our help, let your primary AEGIS Law attorney know.  Alternatively, we have designated a lawyer, Carolyn Devereux, to help our clients and answer questions.

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