As the end of the year approaches, small business owners nationwide need to be aware of a critical requirement under the Corporate Transparency Act (CTA). This Act took effect in January 2024 and mandates that businesses report information about their beneficial owners. Failing to comply with this new law could lead to serious penalties, including fines and even jail time. If you own a business, you must determine whether the CTA applies to you and plan accordingly.
The Corporate Transparency Act (CTA) was introduced to combat illegal activities like tax fraud and money laundering. The goal is to ensure that businesses operating in the United States disclose who truly owns and controls them. This helps prevent individuals from hiding behind shell companies to commit illicit acts.
The law requires businesses to submit a Beneficial Ownership Information (BOI) report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). This report must provide details about individuals who own or control at least 25% of the business or have a significant role in their decision-making processes.
According to the U.S. Chamber of Commerce, not every business must submit a BOI report under the CTA. For instance, large companies with over 20 full-time employees and over $5 million in annual revenue are exempt, along with certain other types of businesses, like banks and nonprofits. However, small businesses such as limited liability companies (LLCs), corporation, and partnerships likely fall under this law’s requirements.
If your business was formed before Jan. 1, 2024, you have until Jan. 1, 2025, to file your initial report. If your business was created after Jan. 1, 2024, you must submit your report within 30 to 90 days, depending on when your business was established.
When submitting a BOI report, your business must provide specific information about both the company and its beneficial owners. This includes:
Additional information about the individuals who helped form the company, known as “company applicants,” may also be required for newer companies.
Missing the January 1, 2025, deadline for submitting your business’s BOI report could lead to severe consequences. Fines can reach up to $10,000, and there’s even the possibility of imprisonment for up to two years. Failure to correct inaccurate or incomplete information within 30 days of a change can also result in further penalties.
If you’re unsure whether your business needs to comply with the CTA or have concerns about meeting the deadline, seeking legal guidance is essential. A business planning attorney can help to ensure that you fulfill your reporting obligations and avoid costly mistakes. Please contact us for a referral if need be.
What Steps Should You Take Before the Deadline?
To prepare for the year-end deadline, take the following steps:
Filing a BOI report may seem straightforward. However, there are specific legal requirements that can be easily overlooked. Business owners are encouraged to work with a qualified business planning attorney to ensure that their report is accurate and complete. Not all accountants or tax preparers offer this service, so it’s crucial to consult a professional who can guide you through the process.
If you’re unsure about how the Corporate Transparency Act applies to your small business or need assistance filing your BOI report, now is the time to act. Contact our law firm today to schedule a consultation with a business planning attorney. We’ll help you navigate the requirements of the CTA and ensure that your business complies with all deadlines.
Reference: U.S. Chamber of Commerce (Aug. 27, 2024) “Corporate Transparency Act — What You Need to Know”
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