The Federal Government has recently enacted the Corporate Transparency Act ("CTA") which implements a new requirement for small businesses to report changes in ownership. The purpose of this new requirement is to assist the government in preventing money laundering and other types of crimes. Small businesses are now required to report changes in ownership to the government, which will hold this information in a secure database for government purposes only and will not be publicly accessible.
Disclaimer: The information provided is intended for informational purposes only and should not be construed as legal advice.
If you are already the owner of a small company or plan to create one, you are required to file this report. However, the information that is required to be reported is not just that of the owners, but any person having control or a beneficial ownership interest ("BOI") in the company. As this is a new requirement, we have already received several questions. Here are some of the most frequently asked ones:
Who needs to file?
Unless your company falls under one of several exemptions, it is the responsibility of the reporting company to obtain the required information from their beneficial owners and file the report. A reporting company is defined as any corporation, Limited Liability Company (“LLC”), or other business entity that files a document under the laws of their State or Indian tribe, and any foreign company registered to conduct business under the laws of any State or Indian tribe. The senior officers of a company should ensure that this report is filed, as they are the individuals who will be held accountable for any failures to file.
When do I need to file?
If you have an LLC that was established prior to 2024, you have until the end of this year to file your report. If you establish a new company in 2024, you must report within 90 days of the date you receive actual or public notice that your company has been registered with the State or Indian tribe. Thereafter, each newly established business entity will be required to file within 30 days of creation or registration.
How often do I need to file?
Generally, you only need to file the report once; however, if there is any information in the report that needs to be updated, such as the home address of an owner or if an owner dies, then you will be required to file an updated report within 30 days after the date in which the change was made. For estates, the date of change is not necessarily the date of death.
Who is considered a beneficial owner?
A beneficial owner is any person that controls at least 25% of the ownership interests in the reporting company or exercises substantial control over the reporting company; however, there are some exemptions.
Which companies or beneficial owners are exempt from filing?
The government has issued a detailed list of 23 different types of exempt companies, which include banks, insurance companies, investment advisors, accounting firms, and some subsidiaries. Even if your company falls within one of the 23 exempt categories, there are additional checklists to determine if your company is in fact exempt. Additionally, there are some exemptions to who is considered a beneficial owner and examples include minors, certain employees, or persons with a future beneficial interest. Even if your company or beneficial ownership interest is exempt, you may still be required to report certain information. If you are not sure if your company qualifies as an exempt entity, you should seek the advice of an attorney.
Where do I file?
Electronically through the Financial Crimes Enforcement Network's secure e-filing system.
What information do I need to file?
The company's full legal name, trade name, U.S. address, US jurisdiction of formation and jurisdiction of first registration if a foreign company. For each beneficial owner and company applicant you will need their full legal name, date of birth, address, and copy of document of identification (such as a driver's license or passport). Note that if your company was established in 2024 or thereafter, you will be required to report the "company applicant(s)" which is the person or persons who are required to report this information to the Financial Crimes Enforcement Network.
What happens if I don't report the required information?
Failure to comply with this reporting requirement or inaccuracies in reporting carries significant penalties of up to $500 per day, imprisonment, and up to a $10,000 fine. Senior Officers of a company will be held liable for failures to report and any willful attempts to provide false information. However, if a beneficial owner who is not a senior official provides false information to the senior official who is filing the report, that beneficial owner can also be held liable for all civil and criminal penalties.
What happens if I discover an error in my filing?
If you discover that you have made an error in your filing, you have 30 days to correct the inaccuracy form the date that you discover it. If you make a correction within 90 days of your initial filing, there will be no penalties.
Are you struggling to navigate the new Corporate Transparency Act (CTA) filing requirements? Don’t worry, we’ve got you covered. Our team of experienced attorneys can help you file the necessary reports and ensure that you are in compliance with the CTA. Contact us today to schedule a consultation and get started.