Corporate Transparency Act Filing Deadline Approaching – Action Required to Avoid Severe Penalties
For business owners, the clock is ticking on Corporate Transparency Act (CTA) compliance, and the consequences for failing to meet the deadlines are severe. Time is running out to prepare and submit required filings with the Financial Crimes Enforcement Network (FinCEN), and ignoring this requirement could cost business owners thousands of dollars in fines or worse. This is a pressing matter that demands immediate attention—waiting until the last minute could result in financial and legal risks that can be easily avoided with early action
What is the Corporate Transparency Act?
The CTA is part of the Anti-Money Laundering Act and aims to crack down on the use of anonymous shell companies in money laundering, fraud, and other financial crimes. Under this law, most U.S. entities must report information about their beneficial owners—individuals who directly or indirectly own or control 25% or more of the entity or exercise substantial control over it.
Who Needs to File?
The filing requirements apply to a broad range of entities, including:
- Corporations
- Limited liability companies (LLCs)
- Limited Partnerships
- Other similar entities registered under state or tribal laws
The CTA filing requirements apply to most business entities; however, certain entities, such as publicly traded companies, regulated entities like banks, and large companies with more than 20 full-time employees and over $5 million in gross receipts, may be exempt. Small and closely held businesses and family offices are among the entities that are impacted by these new reporting requirements.
Key Deadlines
The deadline for reporting beneficial ownership information depends on whether the business was formed before or after January 1, 2024:
For entities in existence as of January 1, 2024, initial reports of reporting companies must be filed no later than January 1, 2025. Different rules apply to the creation of new reporting companies which will require reporting within 90 days of creation if formed in 2024 and within 30 days of creation if formed after December 31, 2024
It’s essential to note that once an entity files its initial report, it must continue to file updated reports if ownership or control changes, ensuring FinCEN has accurate information on file.
What Information Needs to be Filed?
For domestic reporting companies (i.e., an entity formed in a U.S. state or tribal jurisdiction), the report must include (i) the full legal name of the reporting company, (ii) any trade name or “doing business as” name of the reporting company, (iii) a complete current street address of the principal place of business of the reporting company, (iv) the State, tribal or foreign jurisdiction of the reporting company, and (v) the IRS Taxpayer Identification Number of the reporting company.
In addition, for each beneficial owner of the reporting company, the company must report:
- the full legal name of the individual;
- the individual’s date of birth;
- the individual’s current residential street address;
- a unique identifying number and the issuing jurisdiction from one of the following documents – (i) a non-expired passport issued to the individual from the United States,
(ii) a non-expired identification document issued to the individual by a State, local government or Indian tribe for the purposes of identifying the individual, (iii) a non- expired driver’s license issued to the individual by a State, or (iv) a non-expired passport issued to the individual by a foreign government if the individual does not have any of the other documents; an
- an image of the document from which the unique identifying number was
Penalties for Non-Compliance Are Steep
Ignoring the CTA filing requirements could expose business owners to significant financial risks. Civil penalties of up to $500 per day will accrue for every day the filing is late. But it doesn’t stop there—willful failure to comply, or providing false information, could result in criminal penalties, including fines of up to $10,000 and even imprisonment.
What Should You Do Now?
If you own or manage an entity subject to the CTA’s reporting requirements, it’s important to act now to ensure compliance:
- Determine if your entity is subject to the CTA. If so, confirm your beneficial owners and gather the required information.
- Consult with legal professionals. Filing under the CTA can be complex, especially if you are unsure of your entity’s status or have questions about beneficial ownership.
- Stay informed. The law is still evolving, and there may be further updates from FinCEN as the compliance deadlines approach. Be sure to stay on top of any changes to avoid missing important deadlines.
With the deadline fast approaching, now is the time to take action in order to avoid the steep penalties of non-compliance. At Soto Law Firm, we specialize in navigating complex regulations like the Corporate Transparency Act. Our team is ready to help business owners determine if their business needs to file, ensure all required information is accurate, and submit required filings before the looming deadlines. We’re here to help you navigate your CTA filing- call us today at 480-456-6267.
