Updated January 3, 2024

As of January 1, 2024, new and existing entities (yes – all) will need to either (i) confirm they qualify for an exemption from the CTA’s reporting requirements or (ii) timely submit a beneficial ownership information (BOI) report to the U.S. Treasury’s Financial Crimes and Enforcement Network (FinCEN).)

The long-anticipated Corporate Transparency Act (CTA) takes center stage, bringing with it a wave of positive changes for businesses. In this blog, we’ll review into the impact of the CTA on entities, highlighting its role in fostering transparency and accountability. We’ll also discuss the penalties for non-compliance and offer a call to action to help you ensure your entity’s success in this new regulatory landscape.

The Positive Impact of the Corporate Transparency Act

The CTA is all about promoting accountability and transparency among entities. It’s an opportunity for companies to showcase their commitment to ethical business practices. The act requires all business entities formed or registered to do business in the United States to disclose additional information about their beneficial ownership, including the names and addresses of individuals with a significant stake in the company (unless you affirmatively qualify for an exemption).

An “Beneficial Owner” is defined as a person or entity that (i) exercises substantial control over the entity (e.g., any senior officer) or (ii) owns or controls 25% of the entity and collecting the contact information (including physical address) for those individuals.

You may be wondering if the BOI reports will be publicly available and how this information will be used. Fair question, but rest assured that the information will not will be publicly available. Generally, it will be disclosed only (i) to federal and state law enforcement agencies in specified circumstances and (ii) with the reporting company’s consent, to financial institutions in connection with their know-your-customer (KYC) obligations.

Exemptions

There are 23 listed exemptions. These include, among others below are the most notable:

• Sole proprietorships. Filing a document with a government agency to obtain (1) an IRS employer identification number, (2) a fictitious business name, or (3) a professional or occupational license does not create a new entity, and therefore does not make a sole proprietorship filing such a document a reporting company.
• “Large operating companies,” which are entities that (i) have more than 20 full-time U.S. employees (not counting employees of affiliated entities), (ii) reported more than $5 million of revenue from U.S. sources on a consolidated basis to the IRS for the previous year, and (iii) have an operating presence at a physical location in the United States.
• Nonprofit entities, political organizations and certain tax-exempt trusts.
• Public companies, insurance companies, banks, registered investment companies, registered investment advisers and certain other entities already subject to regulatory oversight.
• Subsidiaries that are wholly owned, directly or indirectly, by the foregoing exempt entities.
• Inactive entity created before 1/1/2020 that holds no assets, is not engaged in any business, has no foreign owners, and has not sent or received money or changed ownership in the prior 12 months.

* If you do not qualify for one of these exceptions we can discuss if your entity qualifies for any of the others.

Penalties for Non-Compliance

One key aspect that entities need to be aware of is the penalties associated with non-compliance for both new and existing entities. Fines for failing to file the necessary statements with the Financial Crimes Enforcement Network (FinCEN) can be substantial ($500 a day up to $10,000, and up to 2 years in jail).

For NEW entities, formed after of January 1, 2024, you will have 90 days to report from the date of filing their new entity.

For NEW entities, formed after of January 1, 2024, you will have 30 days to report from the date of filing their new entity.

If you plan to file any new entities after January 1, 2024 please do not hesitate to reach out to our team before you file the new entity.

For EXISTING entities, formed on or before December 31, 2023, you will have 1 year to report. During this time our team will be in touch with existing clients to see if they need support.

If the entity has and changes to the Beneficial Owner Information Report, you must report them within 30 days.

Not only can this impact your company’s financial health, but it can also lead to legal consequences for those involved in your business. Therefore, compliance is not just a matter of good practice; it’s a way to protect your LLC from unnecessary penalties and potential legal troubles.

The CTA represents a positive shift toward a more transparent, accountable, and thriving business environment. Embrace it, and your entity will not only stay on the right side of the law but also thrive in this new era of responsible corporate practices.

Next Steps

Don’t worry — our team is on hand to help you remain complaint with these new regulations. 

If you would like Guide My Business to file the BOIR on your behalf, please submit this FORM.

Contact information

If you have any questions regarding the CTA and how it might impact your business, please contact our team at cta@guidemybusiness.co.