At a Glance
- The Corporate Transparency Act was created to combat illicit financial activites.
- Every “Reporting Company” is required to file a report of its beneficial owners to the US Treasury’s Financial Crimes Enforcement Network (“FinCEN”), and to keep the information reported current.
- Failure to comply may result in fines ranging from $500 to $10,000 per violation and jail time of up to two years.
- If you would like assistance with filing, please contact our attorneys to learn more.
The CTA–What to Know
You may have heard of the new law that came into effect as of January 1st, 2024 – the Corporate Transparency Act (“CTA”). Enacted in 2021, the CTA was created as an effort to enhance transparency in entity structures and ownership to combat money laundering, tax fraud, and other illicit activities. It is designed to capture more information about the ownership of specific entities operating in or accessing the US market.
Every “Reporting Company” is required to file a report of its beneficial owners to the US Treasury’s Financial Crimes Enforcement Network (“FinCEN”), and to keep the information reported current through filing updates in the event of certain changes. Reporting Companies are any domestic or foreign corporation, limited liability company, partnership, business trusts, or any other entity created or registered to do business by the filing of a document with a secretary of state or any similar office under the law of a US state or Indian tribe, and which is not exempted from filing under one of the 23 exemptions. Exempted companies include securities issuers, domestic governmental authorities, banks, and other companies that are generally already subject to regulatory oversight or which are inactive.
For Reporting Companies that were in existence prior to January 1, 2024 (“Existing Companies”), you have until January 1, 2025 to file a Beneficial Owner Information report with FinCEN. If your Reporting Company was formed on or after January 1, 2024 (“New Companies”, you have 90 days to file this report. Existing Companies need only report the Beneficial Owners, but New Companies must also report Company Applicants. Beneficial Owners are defined as those directly or indirectly owning 25% or more of a Reporting Company, AND those who exercise “substantial control” over a Reporting Company. Substantial control generally means senior officers/managers, those who have appointment and removal authority, and those who are important decision-makers. Company Applicants are those who directly file the organizing documents with the secretary of state or Indian tribe, or who are directly responsible for the person doing so. FinCEN has created a lengthy guide as to how to determine whether your company is a Reporting Company, and how to determine who are the Beneficial Owners and Company Applicants.
Noncompliance Penalities
The government is taking this reporting requirement very seriously, imposing hefty penalties and even imprisonment for those who do not comply. Escalating fines range from $500 to $10,000 per violation and jail time of up to two years. It is therefore of the utmost importance to ensure compliance with the new CTA requirements.
We Can Help
We at The Grupp Law Firm LLC are taking these reporting requirements seriously as well, and we are prepared to assist you in being compliant with the CTA. We will help you determine whether your business is a Reporting Company, and if so, who is required to report as Beneficial Owners and Company Applicants. We will also gather required information for reporting and file your company’s initial BOI report with FinCEN.
This is a time-sensitive matter. If you would like assistance with filing future updates to FinCEN, or to receive corporate compliance services to ensure your business remains in compliance with annual filings and meeting minutes and resolutions, please contact our attorneys to learn more.