Fort Lauderdale, Fla. (February 23, 2024) - A significant new law, the Corporate Transparency Act ("CTA"), took effect on January 1, 2024. This legislation requires certain businesses to report Beneficial Ownership Information ("BOI") to the Financial Crimes Enforcement Network ("FinCEN"), a division of the U.S. Department of Treasury. The CTA aims to enhance transparency and combat illicit activities such as money laundering and tax evasion.
Who Needs to File?
The CTA applies to domestic and foreign business entities including:
- Limited liability companies (LLCs)
- Corporations
- Limited partnerships (LPs) and Limited liability partnerships (LLPs)
- Other entities created by filing a document with a Secretary of State or similar office
These entities, known as "reporting companies," must file a BOI report with FinCEN, unless they qualify for one of the 23 listed exemptions. Most exemptions are intended to cover companies that are regulated businesses, such as licensed insurance companies, banks, brokers, securities brokers, credit unions, and public companies. Large companies are exempt if they have both at least 20 full-time employees and greater than $5 million in gross receipts from the prior fiscal year as reported on their tax returns.
What Information is Required?
Reporting companies must submit detailed information about the company and its beneficial owners. A beneficial owner is defined as:
- An individual with substantial control over the company; or
- An individual owning or controlling at least 25% of the company's ownership interests
Important Filing Deadlines?
- Entities formed or registered before January 1, 2024, must file initial reports by January 1, 2025.
- Entities formed or registered in 2024 must file within 90 calendar days of formation or registration.
- Entities formed or registered after January 1, 2025, must file within 30 calendar days of formation or registration.
- Changes to reported information must be updated within 30 days of occurrence.
Penalties for Non-Compliance?
Failure to comply with the CTA can result in significant penalties, including civil fines of up to $500 per day and criminal penalties of up to $10,000 or imprisonment for up to two years.
Why Early Filing is Crucial?
With over 32 million entities expected to file in 2024, we strongly recommend filing your report early to avoid delays and potential system overloads as the deadline approaches.
Next Steps?
Please contact us. We can help you in determining if you are required to report or are exempt from reporting under the CTA, identifying who the beneficial owners are under the CTA, and in preparing and submitting your BOI report accurately, efficiently, and timely, to avoid CTA non-compliance issues. We look forward to serving you and helping you to navigate through the CTA process.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.