corporate transparency act

Small business owners have a lot on their plate, and a new law will only add to the workload. Starting January 1, 2024, the Corporate Transparency Act (CTA) went into effect, impacting around 30 million businesses in the United States. The new law is part of the Anti-Money Laundering Act, created to help prevent crimes like drug and arms trafficking, corruption, and other exploitative practices. It also prevents anonymous shell companies from conducting illegal activities. Not sure how the CTA affects your business? Keep reading to learn more about the CTA of 2024, whether your business is impacted, and how you can get help with reporting and compliance for your business.

What is the purpose of the CTA?

The Financial Crimes Enforcement Network (FinCEN) is a bureau of the U.S. Department of the Treasury that was created to fight money laundering and preserve national security interests. Through the CTA, the bureau will gather information about the beneficial owners and controlling parties of small businesses, including data about the company itself. A beneficial owner is someone who either exercises control of the company or owns/controls over 24% of the company. The company is required to file a report with the FinCEN, including beneficial owners’ names, date of birth, address, and an identifying number like a driver’s license, passport, or other state-issued ID. It must also add the physical address of the business and may require information about the person filing the report. By keeping such information on file, the FinCEN hopes to prevent and deter illicit activity. 

What businesses need to report?

Millions of businesses are required to file a report. Both domestic and non-domestic companies registered to operate in the U.S. must report, but there are some exceptions. In fact, the FinCEN identifies 23 exempt business categories from reporting.

Reporting companies include:

  • Limited Liability Companies (LLCs)
  • Corporations
  • Other entities created or registered with secretary of state or equivalent office

Exempt companies include:

  • Large operating companies
  • Public utilities
  • Inactive entities
  • Banks
  • Credit unions

There are certain requirements that a company must meet to be exempt from reporting, and each category has different criteria based on the type of business it is. 

When and how often do companies need to file a report?

The rules for reporting deadlines vary depending on when the business was created. Companies registered or created before January 1, 2024 have until January 1, 2025 to file an initial report. Those created after January 1, 2024 have 90 days after the entity creation to file. In the future, all entities created after January 1, 2025 will have 30 days to report to FinCEN.

All corrections or changes to any information must be reported within 30 days. 

What if my company fails to report?

Reporting companies that fail to report to the FinCEN are subject to fines of $500 per day up to $10,000 or up to two years of imprisonment. The bureau may hold senior company officers personally liable for failing to report. 

Does my company need a business planning attorney to stay compliant?

Compliance with laws like the CTA is only one part of business planning. L. Jennings Law can help your Arkansas business from start to finish and everywhere in between. We have years of experience with helping individuals set business up for success with the right planning and strategies while staying up to date on new laws like the CTA. If you’d like to know more about how we can help your business, schedule a consultation today.

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