Understanding the Corporate Transparency Act of 2024

Understanding the Corporate Transparency Act of 2024
Prepared by Valley County Economic Development
1/15/2024

What is it?

  • The Corporate Transparency Act (CTA), part of the National Defense Authorization Act for Fiscal Year 2021 and effective from January 1, 2024, introduces essential changes for U.S. small business owners. This law aims to prevent money laundering and other illicit activities by increasing ownership transparency in LLCs, corporations, and similar business entities.
  • The CTA mandates small business entities to report “beneficial owner” details to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. Beneficial owners are individuals who own at least 25% of or exercise substantial control over the reporting business entity​​.

Who does this apply to?

  • The CTA covers smaller, privately held business entities, including LLCs commonly used by small businesses. This includes small businesses with less than 20 FTEs and less than $5M in gross receipts.
  • Publicly traded companies, most financial services providers and certain large entities are exempt.
  • Also exempt from CTA are sole proprietorships and tax-exempt entities registered with the IRS.

What are my responsibilities as a business?

  • Reports will be accepted starting on January 1, 2024.
  • Reporting companies created or registered to do business before January 1, 2024, will have additional time — until January 1, 2025 — to file their initial BOI reports.
  • Reporting companies created or registered on or after January 1, 2024, and before January 1, 2025, have 90 calendar days after receiving actual or public notice that their company’s creation or registration is effective to file their initial BOI reports. Specifically, this 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.
  • Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports.

What must I report?

  • Reporting companies subject to the CTA are required to provide the following information regarding the entity: (i) full legal name; (ii) trade names or d/b/a names; (iii) address of the entity; (iv) the jurisdiction of formation or registration; and (5) the federal taxpayer identification number.
  • For each beneficial owner, the reporting company must provide the following: (i) full legal name; (ii) birthdate; (iii) home address; (iv) an identifying number from a driver’s license, passport, or other approved documents; and (v) an image of the approved document that contains the identifying number. In lieu of (iv) and (v), an individual can apply for a FinCEN identifier number, after which the individual is permitted to use the identifier number on subsequent filings.

How do I properly report?

What happens if I don’t report?

  • The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure.

Additional Information & Sources:

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