The recently enacted Corporate Transparency Act (CTA) imposes a host of new reporting obligations on entities, including corporations and LLCs. Only a few exceptions apply. And the penalty for noncompliance is severe (fines and jail time). This landmark legislation can’t be ignored without peril. And we’re here to help.
The primary goal of the CTA is to create a federal registry of the beneficial owners of various entities. This registry is maintained by the Financial Crimes Enforcement Network (FinCEN).
Entities Required to Report
The CTA casts a wide net, encompassing a range of entities that must comply with its stringent reporting requirements. These include:
1. Corporations: Both domestic and foreign corporations operating within the U.S. are subject to the CTA.
2. Limited Liability Companies (LLCs): LLCs, regardless of how small, are also required to report under the CTA.
3. Other Similar Entities: The Act extends to other legal entities created by filing a document with a secretary of state or a similar office.
Exemptions exist, but they won’t apply to most small businesses. For example, exempt entities are publicly traded companies, banks, credit unions, and entities that employ 20+ people and report $5 million in annual revenues in the U.S.
Entities subject to the CTA must provide detailed information about their beneficial owners. A beneficial owner is defined as any individual who, directly or indirectly, exercises substantial control over the entity or owns 25% or more of the ownership interests in it. The information that must be carefully reported to FinCEN includes full legal names, dates of birth, addresses, and unique identifying numbers from acceptable documents (like a driver’s license or passport).
Compliance and Penalties
Failure to comply with the CTA can lead to significant penalties, including hefty fines and potential prison time. Therefore, it’s crucial for everyone to understand their reporting obligations and adhere to the deadlines set by the Act.
We’re Here To Help!
Navigating the complexities of the CTA can be challenging, especially for smaller entities that might lack the resources for comprehensive compliance. We offer the expertise and support necessary for accurate and timely compliance, thereby avoiding penalties and legal complications. Contact us for help or more information.