Corporate Transparency Act

Corporate Transparency Act of 2021 – What You Need to Know

The Corporate Transparency Act of 2021 (“CTA”) was enacted to enhance transparency in entity structures and ownership to combat money laundering, tax fraud, and other elicit activities. The CTA has been in revision since its initial enactment, however the Federal Government is now prepared to rollout the enforcement effective January 1, 2024.

The CTA, per the Small Business Administration, will affect over 27 million small businesses and non-operating businesses (holding companies or inactive businesses) are not spared. Here’s what you need to know:

All entities, with some limited exceptions, formed before January 1, 2024, must file a report with FinCen (the Treasury Department’s compliance department) by January 1, 2025. This report must contain the entity information as well as all beneficial owner information and managers (which includes legal names, date of birth, home address, social security number, and a photo upload of your passport or driver’s license). 

Any entities formed after January 1, 2025 will be required to file information on who directed the filing, the entity information, beneficial owners, and officers/managers.  The filing will be due within 30 days of formation. 

FinCen has released a booklet for small businesses. There are additional resources on the FinCen website:  Beneficial Ownership Information Reporting | FinCEN.gov

The filings are a one-time filing, however any changes to information previously disclosed will require an amended filing. 

Quick Points:

1) Do not assume that the CPA does not apply to you – most likely, it will. There are some exceptions that are discussed in the guide we attached.  You will still need to file and claim the exemption.

2)   Inactive entities – entities that have not been officially dissolved by you or by the Secretary of State, are required to file, whether or not you are using them. 

3) Penalties for failing to file are $500 per day, with willful failure to file resulting in fines of $10,000 and up to two (2) years of incarceration. 

4) Trusts that hold interests or stock must also be disclosed, with their Trustees and Grantors being required to file as beneficial owners. 

5) Individuals who do not cooperate with entity filings can be personally fined or incarcerated. 

If you currently have entities that are inactive or that need to be dissolved and would like to do so in order for these entities not to be subject to the CTA, please contact our office for assistance. If you were considering starting a business in the first part of 2024, you may buy additional time for CTA filings by establishing the entity prior to January 1, 2024. While we are still evaluating the requirements under the CTA and changes in our processes and how we can better assist our clients, we are committed to assisting all of our clients to navigate the CTA.  If you would like to discuss these requirements or how we can help, please give us a call to schedule an appointment.