The Corporate Transparency Act (CTA): What You Need to Know?

The Corporate Transparency Act (CTA), which went into effect on January 1, 2024, is a federal law that requires certain business entities to disclose their beneficial owners. If you own or control a company, you need to understand this law and what it means for you.

Do You Need to File?

The CTA applies to “reporting companies,” which are corporations, limited liability companies (LLCs), and other similar entities that are:

• Created by the filing of a document with a state or tribal government; or
• Formed under the laws of a foreign country and registered to do business in the United States.

Certain entities are exempt from the reporting requirement, including: 

  • Publicly traded companies
  • Banks
  • Credit unions
  • Insurance companies
  • Investment companies
  • Pooled investment vehicles
  • Companies that employ more than 20 employees, have an operating presence in the United States, and file tax returns reporting more than $5 million in gross receipts.

If your company does not fall into one of these exempt categories, you will likely need to file a report with FINCEN.

What Information Will You Need to Report?

You will need to file a report with FINCEN that includes:

  • Information about your company, including its legal name, any trade names, its street address, its jurisdiction of formation, and its taxpayer identification number.
  • Information about its beneficial owners, including:
    • Full legal name
    • Date of birth
    • Current residential street address
    • Unique identifying number and issuing jurisdiction (or state) from an acceptable identification document (such as a passport, driver’s license, or state ID)
    • An image of the information page of the identification document

A “beneficial owner” is an individual who:

• Exercises substantial control over the reporting company;
• Owns or controls at least 25% of the ownership interests of the reporting company.

When Do You Need to File?

The deadline to file an initial report depends on when your company was created or registered:

• If your company was created or registered before January 1, 2024, you must file by January 1, 2025.
• If your company was created or registered after December 31, 2023, you must file within 30 calendar days of formation or registration.

You will also need to file updates within one year of the date when information previously reported becomes inaccurate. Updates are required when information about the company or its beneficial owners changes.

How Do You File the Report?

To file a report, you will need to:

• Create a FinCEN user account at fincen.gov and obtain a FinCEN identifier.
• Go to fincen.gov/boi and select “File a report using the BOI E-Filing System.”
• Select “File BOIR” and then “Prepare & Submit BOIR.”
• Complete the report by answering the prompts and uploading required documents.

Will Your Information Be Public?

The information you report to FINCEN will not be made available to the general public. It will only be disclosed to:

• Federal agencies engaged in national security, intelligence, or law enforcement activity;
• State, Tribal, or local law enforcement agencies, if authorized by a court order;
• Financial institutions subject to customer due diligence requirements, with your consent;
• Federal functional regulators, other than the Federal Trade Commission, and Treasury Department bureaus and agencies.

What Happens if You Don’t Comply?

Failure to report complete and updated beneficial ownership information to FINCEN, or providing false or fraudulent information, can result in both civil and criminal penalties. These include fines up to $500 for each day the violation has existed, and imprisonment for up to two years.

What Should You Do Now?

The Corporate Transparency Act represents a significant change in the transparency of company ownership in the United States. If you own or control a company, you need to understand your obligations under this law and take steps to comply.

You should consult with legal counsel to determine if your company is subject to the CTA and to ensure you are meeting your reporting obligations. You should also implement procedures to collect and report the required information about your beneficial owners.

Don’t wait until it’s too late. Take action now to comply with the Corporate Transparency Act.

As always, please reach out with questions or comments.

Prepared by: Anna Hornowska-Spencer at 3A Financial Consulting LLC
Date: 8/13/2024
For more information contact aspencer@3afinancialconsulting.com or visit www.3afinancialconsulting.com