Comply with CTA by January 1, 2025 to Avoid Big Fines!

By Senior Associate Jeneva Vazquez

On January 1, 2024, the Corporate Transparency Act (CTA) officially took effect, introducing new reporting obligations for nearly all businesses in the United States. The legislation aims to increase transparency in corporate ownership and help combat global terrorism and money laundering. However, it also represents a significant shift for many small business owners who previously enjoyed a level of privacy in their operations.

What the CTA Requires:

Under the CTA, most businesses are now required to submit a report to the Financial Crimes Enforcement Network (FinCEN), detailing information about their “beneficial owners.” A beneficial owner is defined as any individual who directly or indirectly exercises substantial control over the business or owns at least 25% of the company. This includes key management roles such as LLC managers, board members, and CEOs. The CTA represents a significant shift in the regulatory landscape for small businesses.

The report must include personal details for each beneficial owner, including: full legal name, date of birth, current residential address, and a copy of a government-issued ID (e.g., U.S. passport or driver’s license)

For businesses formed before January 1, 2024, there is a grace period until January 1, 2025, to submit the first report. After the initial report, businesses must notify FinCEN of any changes to the reported information.

Failure to comply with the CTA can result in significant penalties, including daily fines of $500 and potential criminal penalties of up to two years in prison.

Who Must Comply with the CTA?

The CTA applies to most entities formed or registered in the U.S., with certain exemptions for larger operating companies and nonprofit organizations already subject to extensive regulatory oversight.

If your business was formed before January 1, 2024, it’s crucial to make a plan to comply with these reporting requirements by the January 1, 2025 deadline. Failure to do so could result in costly fines.

How We Can Help?

To help you navigate the new CTA requirements, we’ve included beneficial owner reporting as part of our Annual Business Maintenance Plan for clients. If you’re interested in having us handle the reporting for you, the deadline to sign up is November 25, 2024.

We will not only submit the initial report but can also assist with filing any amendments for as long as you remain a member. The Annual Business Maintenance Plan includes quarterly telephone calls, us filing your annual report with the Secretary of State, a discount on future legal services, and other things that you can see HERE.

It’s essential to understand these new obligations and ensure timely compliance to avoid penalties. If you need assistance filing your beneficial owner information before the reporting deadline, please contact us before November 25, 2024.