CTA Enforces New Reporting Regulations on Small Businesses
CRITICAL LEGISLATIVE UPDATE | The Corporate Transparency Act (CTA)

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If you’re a small business owner — Here’s some IMPORTANT NEWS! Under the Corporate Transparency Act (CTA), enacted in 2021, you can likely expect new federally mandated reporting regulations in the coming year.

An addendum to the Anti-Money Laundering Act (AMLA) passed in 2020, the CTA activates new reporting requirements applicable to roughly 30 million small businesses starting in 2024.

What’s The CTA’s Purpose?

The legislation aims to expose and curb illegal activities, primarily money laundering, which is often hidden behind a network of shell corporations meant to obscure a business owner’s true identity.

To achieve this goal, the CTA empowers the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) to gather information from private companies about their owners and corporate officers with controlling interest.

Information gathered by FinCEN will populate a national registry containing business formation documents filed with state-level business regulatory offices.

Business owners failing to comply with CTA reporting requirements could face civil penalties and potentially criminal prosecution.

What Businesses Are Required to Comply With the CTA?

In short, the CTA applies to any company with twenty or fewer full-time employees in the United States formed by filing paperwork with the Secretary of State or an equivalent state-level entity.

This mainly applies to corporations and limited liability companies. But in several states, limited partnerships, professional associations, cooperatives, real estate investment trusts, and trusts are also required to file business formation documents that, in turn, must be filled out with the Treasury Department under the terms of the CTA. Non-US companies registered to operate in the United States must also submit applicable reporting documentation.

What Business Formation Details Must Be Reported Under the CTA?

Qualifying business must submit three key pieces of reporting information:

The Company Name and any applicable DBAs, its principal place of business address, state of formation, and taxpayer identification number.

The Beneficial Owner’s* full legal name, date of birth, residential address, identification number from a driver’s license, passport, or other state-issued identification (ID), and a copy of the corresponding ID.

*A Beneficial Owner is defined as an individual who exercises “substantial control” over the reporting company or holds at least a 25% stake in the business. Senior officers, directors, and stakeholders responsible for making “significant business decisions” likely qualify as “beneficial owners.”

The Company Applicant’s* full legal name, date of birth, residential address, identification number from a driver’s license, passport, or other state-issued identification (ID), and a copy of the corresponding ID.

*A Company Applicant is defined as anyone who works for a business formation service or law firm and may include accountants or lawyers if they file documents that create or register a reporting company on behalf of a third party.

What’s The Timeline For CTA Document Filing?

Businesses formed before January 1, 2024, have until January 1, 2025, to complete their CTA registration.

Additionally, businesses formed after January 1, 2024, will have 90 days to complete their CTA registration.

What Are The Penalties For Failing to Submit CTA Documentation?

Business owners who fail to provide mandated documentation or knowingly submit incorrect information can face fines of up to $500 per day, capped at $10,000, and a prison sentence of up to two years.

If you unintentionally submit incorrect information, you can avoid fines and jail time if you submit corrected information within 90 days.

Wondering if CTA Regulations Apply to Your Business?

If this is the first you’ve heard of the Corporate Transparency Act, you likely have questions about compliance requirements, required materials, and how to file necessary documentation.

If this is you, don’t fret, I’m here to help! I’ll review your circumstances and determine if your business is subject to CTA regulations, gather the necessary data, and submit your compliance package to the FinCEN on your behalf.

To get the process started, reach out for a FREE consultation!

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