The New Corporate Transparency Act – What All Small Businesses Need To Know~2 min read

The Corporate Transparency Act (CTA) went into effect on January 1, 2024. This is a significant change in federal law that will impact nearly every business that is operating through a legal entity such as a corporation, limited liability company (including single member limited liability companies), limited partnership, or other similar entity that is created by filing with any state’s secretary of state (“Company” or “entity”).

All companies should be prepared to comply with the new federal reporting requirements by filing an informational report with the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) unless they are specifically exempt. The report discloses the company’s beneficial ownership information as it relates to the company and its owners and principals. This informational filing needs to be updated within thirty (30) days whenever there is a change to the beneficial ownership.

If your entity was formed prior to January 1, 2024, and it does not qualify for an exemption (most small businesses are not exempt), the entity has until the end of 2024 to file the disclosure with the Department of Treasury’s Financial Crimes Enforcement Network. If the entity was formed on January 1, 2024, or later and it does not qualify for an exemption, the entity must file the disclosure with the Department of Treasury’s Financial Crimes Enforcement Network within ninety (90) days of the date of formation. The filing deadline will change to thirty (30) days for companies formed on January 1, 2025, or later. There are significant financial penalties for late filings or if you fail to file the required disclosure.

The CTA was established to be a tool to prevent money laundering and other illicit activities in the United States financial system where companies were established to conceal illegal activities through one or more entities. The CTA requires private companies that meet the CTA criteria of a “reporting company” to disclose its beneficial ownership information as it relates to the company and its owners and principals. The beneficial ownership information must be reported through a new federal government online portal called the “Beneficial Ownership Secure System.” Additional information about the reporting requirements, including answers to questions is available on the FinCEN’s beneficial ownership information web page at https://www.fincen.gov/boi.

For legal advice regarding your corporation, limited liability company and other business entities, contact the attorneys at Parnell, Michels & McKay, PLLC. We offer advice to all types of business entities designed to achieve each client’s goals and needs.