Corporate Transparency Act

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What is CTA?

Implemented in 2021, the Corporate Transparency Act (CTA) strives to counter unlawful activities such as tax fraud, money laundering, and terrorism financing by obtaining additional ownership details from specific U.S. businesses engaged in or entering the country’s market. According to the recent law, businesses meeting specific criteria are required to furnish a Beneficial Ownership Information (BOI) Report to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury, disclosing information that identifies individuals connected with the reporting company.

Understanding the details of this legislation and its possible consequences is crucial for small businesses. Failure to file or update this report could result in criminal or civil penalties.

Who needs to file?

Companies required to report are called reporting companies. There are two types of reporting companies:

  1. Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
  2. Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.
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Who is a beneficial owner?

A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests.

What Info is required

A reporting company will have to report the following:

  • Its legal name.
  • Any trade names (DBA’s or trading as)
  • Current street address of its principal place of business
  • Jurisdiction of formation or registration.
  • Its Taxpayer ID Number

What if my information changes?

If there is any change to the required information about your company or its beneficial owners in a beneficial ownership information report that your company filed, your company must file an updated report no later than 30 days after the date of the change. A reporting company is not required to file an updated report for any changes to previously reported information about a company applicant.

Penalties for not complying.

A person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. That person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000.

When do I have to file the initial report?

  • If your company existed before January 1, 2024, it must file its initial beneficial ownership information report by January 1, 2025.
  • If your company was created or registered on or after January 1, 2024, and before January 1, 2025, then it must file its initial beneficial ownership information report within 90 calendar days after receiving actual or public notice that its creation or registration is effective.
  • If your company was created or registered on or after January 1, 2025, it must file its initial beneficial ownership information report within 30 calendar days after receiving actual or public notice that its creation or registration is effective.

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