The Corporate Transparency Act (CTA) requires most small business entities to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). Entities that are exempt from the reporting requirements include publicly traded companies, wholly owned subsidiaries of publicly traded companies, and companies that meet certain size and revenue thresholds. Reporting companies must disclose the beneficial owner's name, address, date of birth, and identification number. Penalties for noncompliance include civil fines and potential criminal liability. Failure to do so within the timeframe required under the act could subject your business to fines and potentially lead to jail time for willful violations. Read more below so you can be prepared!
The Corporate Transparency Act (CTA) was enacted as part of the Anti-Money Laundering Act of 2020. The CTA imposes new reporting requirements for beneficial ownership information on certain "reporting companies." According to the analyses we found, reporting companies include corporations, limited liability companies, and similar U.S. entities, as well as foreign companies that are registered to do business in the U.S. The CTA defines a "beneficial owner" as an individual who, directly or indirectly, either "exercises substantial control over the entity" or "owns or controls not less than 25% of the ownership interests of the entity."
Reporting companies must disclose the beneficial owner's full legal name, date of birth, current residential or business address, and unique identifying number from an acceptable identification document or FinCEN identifier. There are a number of exemptions to the reporting requirements, including for publicly traded companies, wholly owned subsidiaries of publicly traded companies, and companies that employ more than 20 employees on a full-time basis in the U.S., have an operating presence at a physical location in the U.S., and have filed income tax returns in the U.S. demonstrating more than $5 million in gross receipts or sales.
Under the Corporate Transparency Act, reporting companies that were formed or registered before the effective date of the regulations January 1, 2024, must file a report with FinCEN within two years of the effective date (2025). For companies created or registered in 2024, the reporting deadline has been extended to 90 days from date of creation to report this information to FINCEN. Companies formed or registered after 2024 must file a report at the time of formation or registration. Additionally, companies must update their reports within one year of any changes in beneficial ownership.
Compliance with this new regulation is important as the CTA sets out penalties for noncompliance. For example, it is unlawful for any person to willfully provide false or fraudulent beneficial ownership information to FinCEN, or to willfully fail to report complete or updated beneficial ownership information. Violators may be fined, imprisoned, or both.
Want more information about this new law and how it might effect you? Wish to have us file the information for you? Call us today at 503-877-0881 or book a free or low-priced consult here to see how we can help.