Under the Microscope: Corporate Transparency Act Shines Light on Small Business Ownership
A new era of transparency has dawned for small businesses across the United States. The Corporate Transparency Act (CTA), enacted in 2020, requires most domestic and foreign business entities formed or registered to do business in the U.S. to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). This article unpacks the nitty-gritty of this new requirement, focusing on the specific information small businesses need to provide, the relevant dates and timelines for registration, and the potential penalties associated with non-compliance, along with the underlying purpose of this unprecedented shift.
What You Need to Know:
As of January 1, 2024, small businesses must report the following information about their beneficial owners:
Name and date of birth
Residential address
Social Security number (SSN) or another unique identifying number
Supporting Documentation of Residency or Citizenship (State Issued ID, Passport, etc.)
Percentage of ownership or control
Deadlines and Timelines:
Existing Companies: Businesses formed or registered before January 1, 2024, have until January 1, 2025 to file their initial beneficial ownership information (BOI) report.
New Companies: Businesses formed or registered on or after January 1, 2024, have 90 calendar days from receiving notice of their creation or registration to file their initial BOI report.
Penalties for Non-Compliance:
Failing to register with FinCEN under the CTA can result in significant civil penalties, including:
$500 per day for each day the violation continues.
Criminal penalties are also available, including up to two years of imprisonment and up to $10,000 in fines.
Additional administrative penalties at FinCEN's discretion.
The Purpose Behind the Curtain:
The CTA aims to combat illicit financial activity, such as money laundering and terrorist financing, by shedding light on the true owners of businesses often used to mask criminal activity. By making beneficial ownership information accessible to law enforcement and other authorized parties, the CTA hopes to:
Prevent criminals from hiding behind shell companies
Disrupt illegal financial transactions
Increase accountability and transparency in the financial system
Impact on Small Businesses:
While understanding the rationale behind the CTA is crucial, small businesses may understandably find the new reporting requirements daunting. Resources and support are available from FinCEN, including:
Small Entity Compliance Guide: Provides step-by-step instructions and FAQs.
BOI E-Filing Website: A secure platform for submitting reports electronically.
Informational Video: A video created by FinCen with a brief overview of the BOI reporting requirements.
Remember, staying informed, utilizing available resources, and complying with the CTA's registration requirements are essential to avoiding hefty penalties and navigating this new chapter towards a more transparent and secure financial system for small businesses and the larger ecosystem. Visit FinCen’s Beneficial Ownership Interest website for additional information, and to register your small business as soon as possible. If you need further assistance or want the highest form of assurance that your small business is compliant with these new requirements, please contact our offices or schedule a consultation today so that we can help simplify this transition for you and your business.
Please note: This information is intended as general commentary or guidance only and should not be construed as legal advice. Please consult with a qualified legal professional, at KARLO Law, directly for specific professional advice.
