The Corporate Transparency Act (CTA) went into effect on January 1, 2024, impacting millions of small businesses across the United States. Designed to combat illicit activities such as tax fraud, money laundering, and the financing of terrorism, the CTA requires specific U.S. businesses to submit a Beneficial Ownership Information (BOI) Report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). Here’s what small business owners need to know about this significant new legislation.
What is the Corporate Transparency Act?
Enacted in 2021, the CTA aims to capture more ownership information for businesses operating in or accessing the U.S. market. By requiring businesses to disclose their beneficial owners, the CTA seeks to prevent individuals from using U.S. entities to facilitate illegal operations, which pose threats to national security and economic integrity.
Who is Considered a Beneficial Owner?
Under the CTA, a beneficial owner is anyone who directly or indirectly holds a significant ownership stake in a company. This includes individuals who:
- Have a major influence on the company’s decisions or operations
- Own at least 25% of the company’s shares
- Have similar control over the company’s equity
What Information Must Be Reported?
The BOI report must include detailed information about the business and its beneficial owners, such as:
- Names
- Addresses
- Birthdates
- Identification numbers (e.g., license or passport number)
- Jurisdiction of the documents
Businesses established after January 1, 2024, must also include information about their company applicants. All reporting companies must provide their legal name, trademarks, current U.S. address, taxpayer identification number, and the jurisdiction of their formation or registration.
Reporting Process and Deadlines
With the CTA now in effect, reporting companies have specific deadlines to submit their BOI reports:
- Businesses established before January 1, 2024, must file by January 1, 2025.
- Those created between January 1, 2024, and January 1, 2025, have 90 days from the notice of formation or public announcement to file.
- Businesses established on or after January 1, 2025, must file within 30 days of formation or public announcement.
Updating BOI Reports
Updates to BOI reports are required when there are changes in beneficial ownership information. For example, if a beneficial owner changes their address, legally changes their name, or obtains a new driver’s license, an update must be filed within 30 days. Operational changes or new delegations of authority that result in significant control shifts also necessitate updates.
Getting Help with BOI Reports
While businesses can file their own BOI reports, it is recommended to consult with knowledgeable advisors, such as attorneys or accountants, to ensure compliance and accuracy. Errors in these reports can lead to significant penalties, so professional guidance is advisable, especially when complex ownership structures are involved.
Conclusion
The Corporate Transparency Act introduces crucial requirements for U.S. businesses, aiming to enhance transparency and combat illicit activities. Small business owners must understand these new obligations to avoid penalties and ensure compliance. Consulting with legal or accounting professionals can provide the necessary support to navigate these requirements successfully.
For personalized advice tailored to your specific situation, contact The Law Offices of Lawrence Israeloff. We are here to help you understand and comply with the new Corporate Transparency Act requirements, ensuring your business remains compliant and secure.
