The Corporate Transparency Act: Are You Compliant?

The Corporate Transparency Act, a significant law passed in 2021, is designed to combat financial crimes like money laundering and tax evasion. It requires many businesses to disclose information about their owners. While this may seem like an additional responsibility, it’s crucial to understand its impact on your business and take the necessary steps to comply. With the deadline approaching quickly, I’ll also show you how to get the necessary support to ensure your business is compliant, relieving you of any compliance-related stress. 

CTA Basics: What You Need to Know

The CTA is based on lawmakers’ concern about the role of shell companies in facilitating illicit activities. These shell companies are often used to disguise the actual ownership of assets, making it difficult for law enforcement to trace the money flow. Therefore, the core purpose of the CTA is to collect beneficial ownership information. You’ll need to provide details about the individuals who ultimately own or control your business. This includes names, dates of birth, addresses, and passport or government-issued ID numbers.

You’ll also need to provide information about your business, such as its legal name and address and the name and address of a company applicant (usually the person who formed the company). By requiring businesses to disclose their beneficial owners, the government aims to expose shadowy operations. This increased transparency is expected to deter criminals and make investigating and prosecuting financial crimes easier.

Moreover, while the CTA casts a wide net, it doesn’t impact every business. It targets corporations and limited liability companies (LLCs) that operate in the United States. However, the definition is broader than just these types of entities. Any business formed by filing paperwork with a state or tribal government is likely covered. That most likely means your business is subject to the law. One general exception is a business structured as a sole proprietorship or partnership. But it’s always a good idea to double-check to be sure. 

How to Comply With the CTA 

Now that you know the purpose of the CTA, how it works, and the impacts on your small business, let’s turn to compliance. To ensure your business is compliant with the CTA, you should take the following steps:

Determine if your business is subject to the law: Understand the specific requirements based on your business structure and formation date. As your Business Advisor, I can help. Book a call with me, and I’ll show you how to answer your questions.

Gather necessary information: As outlined above, collect the details about your business and its beneficial owners.

Choose a reporting method: Decide how you will submit the information to the Financial Crimes Enforcement Network (FinCEN), the government agency responsible for administering the law. This can be tricky, so don’t hesitate to contact me, and I’ll help you with it.

Maintain records: Keep accurate and up-to-date records of the information you provide. If you work with me, I’ll also support you with this. I’ll keep your information on file so it’s readily accessible if needed, and I’ll also support you on an ongoing basis to help keep you accountable for maintaining accurate records. 

Stay informed: Stay current on any changes or updates to the law or regulations. When you work with me, I’ll do this for you and notify you when any changes affect your business, so you’ll never have to worry if your business is at risk.

While these steps provide a solid foundation for compliance, it’s essential to understand the potential consequences of non-compliance. Failing to meet the CTA’s requirements can result in significant penalties, including hefty fines and even imprisonment in severe cases. The penalties for failure to comply include:

• Civil penalties: Businesses that fail to report required information about their beneficial owners or report incorrect or incomplete information face fines of up to $500 per day until the violation is corrected. These fines can quickly accumulate, leading to significant financial burdens.
• Criminal penalties: In cases of willful or fraudulent non-compliance, individuals involved can face fines of up to $10,000 and imprisonment for up to two years.

As you can see, the consequences of noncompliance – even if it’s accidental – are too significant to ignore. Understanding and adhering to the CTA is crucial to avoid these potential risks. 

Your Next Step

Even though the CTA became law in 2021, the government didn’t start accepting filings until January 1, 2024. Therefore, 2024 is the first year you’re required to submit your information. And the filing deadlines are approaching quickly. Existing companies registered to do business in the U.S. before January 1, 2024, must file by January 1, 2025. Companies created or registered in 2024 have 90 calendar days to file after receiving actual or public notice that their company’s creation or registration is effective (this information comes from your State’s Secretary of State, not the federal government). 

How We Support You to Ensure Your Business is Never at Risk

I understand the complexities of navigating new regulations like the CTA can pose for your small business. These changes can introduce uncertainties and potential risks that divert your focus from growth. That’s why I offer a comprehensive Business Breakthrough Session where we’ll assess your business’s overall health, including its compliance systems. Together, we’ll develop a tailored plan to address any vulnerabilities and ensure your business is compliant with all applicable laws and regulations and positioned for continued success. With my guidance, you can confidently navigate this new landscape and achieve your business goals.

Book a call to learn more about how we can support you in ensuring your business is never at risk of non-compliance with the CTA.

Contact us today!

This article is a service of Res Nova Law, a Personal Family Lawyer® Firm. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Life & Legacy Planning™ Session, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Life & Legacy Planning™ Session.

The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.