Corporate Transparency Act

Legal Compliance and Reporting

🏢The Corporate Transparency Act, effective January 1, 2024, mandates most businesses, including LLCs, S Corps, and C Corps, to file a Beneficial Ownership Information (BOI) report disclosing their beneficial owners to the U.S. government.

💻Businesses can file the free BOI report online through the FinCEN website, with a deadline of January 1, 2025 for most entities, to avoid potential penalties of up to $500 per day for willful non-compliance.

Business Credit and Funding Opportunities

💳Filing the BOI report enables businesses with an LLC and EIN to unlock business credit and funding, creating a separate credit profile from personal credit and potentially accessing hundreds of thousands of dollars in funding.

Transition from Side Hustles

💼The new law encourages the transition from side hustles to legitimate businesses, emphasizing the importance of proper business structure and compliance for those earning over $1,000 annually through an LLC or S Corp.

Proactive Reporting

📊Even exempt businesses are advised to file the BOI report as it's free and can help avoid potential compliance issues, underscoring the importance of proactive reporting in the new regulatory landscape.

Here what you need to do:

The Corporate Transparency Act (CTA) is a U.S. law enacted in January 2021 to combat money laundering, corruption, and other financial crimes by increasing transparency in corporate ownership. It requires certain businesses to disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.

Key Points of the CTA:

1. Who Must Comply:

   • Most small businesses, LLCs, corporations, and similar entities formed or registered in the U.S.
   • Exceptions include publicly traded companies, certain large businesses with more than 20 employees and $5 million in revenue, and heavily regulated entities like banks.

2. Beneficial Owner Defined:

   • A person who owns or controls at least 25% of the company or has significant decision-making authority.

3. Information to Report:

   • Full legal name
   • Date of birth
   • Residential or business address
   • Identification number from an acceptable ID (e.g., passport or driver's license)

4. Filing Timeline:

   • Starting January 1, 2024, new entities must report this information at the time of formation.
   • Existing entities formed before this date must report by January 1, 2025.

5. Penalties for Non-Compliance:

   • Fines up to $500 per day for failure to report, with a maximum of $10,000.
   • Potential criminal penalties, including imprisonment, for willful violations.

Steps for Small Businesses to Be Legal Under the CTA:

1. Determine Applicability:

   • Confirm whether your business is required to report under the CTA.
   • Review exceptions to see if your business qualifies for an exemption.

2. Identify Beneficial Owners:

   • Determine who owns or controls the business (at least 25% ownership or significant decision-making authority).

3. Gather Required Information:

   • Collect full legal names, dates of birth, addresses, and ID numbers for all beneficial owners.

4. Prepare for Filing:

   • Familiarize yourself with the filing process through FinCEN.
   • Ensure all details are accurate to avoid penalties.

5. Submit Reports on Time:

   • New businesses: File when forming or registering the entity starting January 1, 2024.
   • Existing businesses: Submit the report by January 1, 2025.

6. Update Information:

   • Notify FinCEN of any changes in beneficial ownership within 30 days.

7. Seek Professional Advice:

   • Consult a lawyer or accountant to ensure compliance, especially if your ownership structure is complex.

By complying with the CTA, small businesses avoid penalties and contribute to a transparent and fair business environment.