Understanding the Corporate Transparency Act (CTA): A Comprehensive Guide for Businesses

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Introduction to the Corporate Transparency Act (CTA)

The Corporate Transparency Act (CTA) mandates entities like LLCs and corporations to report their ownership information to the Financial Crimes Enforcement Network (FinCEN). This new filing requirement became effective on January 1, 2024, and aims to increase business transparency by mandating reporting of owners of privately held businesses. If you own an entity, you MUST do this. Compliance deadlines vary: existing businesses have until January 1, 2025; new entities formed after December 31, 2023, have to file within 30 days! There is a $500/day penalty for willfully failing to file!

Here is the link to fileBOI E-FILING (fincen.gov) It only takes a few minutes and right now is free to file.  

You will need the entity EIN, driver’s licenses, Social Security Numbers, and other personal details for all owners. It is best to have that ready when you begin the filing process. 

Key Reporting Requirements Under the CTA
Timeline for Compliance
  • Existing Companies: Entities formed or registered before January 1, 2024, must file their initial Beneficial Ownership Information (BOI) report by January 1, 2025.
  • New Companies: Entities formed or registered between January 1, 2024, and January 1, 2025, are required to file within 90 days post-registration. For those registered on or after January 1, 2025, the deadline is 30 days post-registration.
Who Needs to Report?
  • Domestic Reporting Companies: This includes corporations, LLCs, or entities formed by filing a document with a secretary of state or similar office, excluding exempt entities and excluding trusts.
  • Foreign Reporting Companies: Entities formed under foreign laws but registered to conduct business in the U.S.
Information to be Reported
  • Beneficial Ownership Information (BOI): This encompasses personal identifying details of individuals owning or controlling significant portions (25% or more) of the company.
  • Substantial Control: Identification of individuals with substantial control over company decisions or operations. This may include board members, CPA’s and more. We feel it is better to err on the side of over-inclusion rather than omit something.
Updates and Corrections
  • Any changes in beneficial ownership or substantial control must be reported within 30 days of occurrence.
  • Corrections to previously filed reports are required within 30 days upon discovery of inaccuracies.
Exemptions and Exceptions

Certain entities are exempt from the CTA reporting requirements, including publicly traded companies, large operating companies, and other specifically outlined entities. It’s important to consult the detailed list of exemptions to determine if your business falls under these categories.

Privacy and Data Protection

FinCEN ensures the confidentiality of BOI. This information is not public and is accessible only to authorized government agencies for specific purposes like law enforcement, national security, and regulatory compliance.

Penalties for Non-Compliance

Businesses that fail to comply with the CTA’s requirements could face severe consequences, including substantial fines and the possibility of criminal charges.

See the full list of FAQ’s here:

Beneficial Ownership Information Reporting | FinCEN.gov

Expert advice
Steps for Compliance

To comply with the CTA:

  1. Determine if your business is subject to the CTA.
  2. Identify beneficial owners and individuals with substantial control.
  3. Collect necessary personal information.
  4. Submit the BOI report to FinCEN within the specified timeline.

Here is what it looks like to file your BOI:

Step 1 is to file the “Initial Report”

Step 2 is to request to receive a FinCEN ID and submit the entity details. 

Step 3. If your entity was formed in 2023 or earlier, check box 16 and you can move on to step 4.

Step 4 is to add all Beneficial Owners and their contact details.

Be sure to download your transcript showing your successful filing! 

Conclusion

The Corporate Transparency Act marks a significant step towards enhancing transparency in business ownership. By understanding and adhering to its requirements, companies can not only ensure compliance but also contribute to a more transparent and secure business environment.

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