I usually try not to dive down the rabbit hole of legislation, but in regards to the Corporate Transparency Act (CTA), I just couldn’t ignore it. For any of you business owners, or aspiring business owners out there, there are some things about the CTA that you MUST KNOW.
Complying with the CTA is now one of the standards of doing business in the United States.
The bottom line is that business owners in the US will need to do additional reporting for their entities of beneficial ownership and personal information! So, unless you qualify for an exemption (which I don’t), we (as well as the projected 30 million other small businesses in the US) will need to navigate the new federal requirements for reporting beneficial ownership and personal information.
Here are some basics provided by Anderson Law Group:
What is the CTA?
Effective January 1, 2024, the Corporate Transparency Act (CTA), a bill that was originally passed in 2021, aims to increase transparency in business ownership by requiring certain entities to report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), which is a Department of the Treasury. Compliance with this new law is crucial, and noncompliance can result in severe consequences.
Who is affected by the CTA?
The CTA applies to most domestic and foreign corporations, limited liability companies (LLCs), and similar entities formed or registered in the United States. This includes but is not limited to, businesses such as:
- Limited Liability Companies (LLCs)
- Limited Partnerships (LPs)
- Business Trusts
Exemption from the CTA:
There are 23 exemptions outlined in the CTA, and law groups like Anderson can help you determine if your entity falls under one of these exemptions. Some exempt entities include:
- Land Trusts
- Living Trusts
- Unfiled Cells/Series of a Series LLC
What information needs to be reported?
The CTA requires reporting companies to submit information regarding their beneficial owners, including:
- Full legal name
- Date of birth
- Complete current address
- Government-issued Photo ID
- Unique Number
- Issuing Jurisdiction
When is the deadline for reporting?
- For entities formed after 1/1/2024, the initial report must be submitted within 90 days of formation.
- For entities created before 1/1/2024, the initial report must be submitted by January 1, 2025.
- After the initial report, updates must be filed within 30 days of any changes to beneficial ownership information.
What are the potential consequences of noncompliance?
Failure to comply with the CTA can result in significant penalties, including:
- Civil penalties of up to $500 per day, per entity, for failing to file a timely report
- Criminal penalties of up to $10,000 and/or imprisonment for up to two years for willful violations
A great place to find out more information is with your legal or tax professional. Although this is not in my professional wheelhouse, feel free to reach out and let me know your thoughts.
I’m including a few videos that helped me understand the basics and the requirements for filing.
Cheers to your success,
REALTOR® Alanna Spees