Each new year brings change along with it, and 2024 is no different. On January 1st, 2024, the new Corporate Transparency Act (“CTA”) went into effect. The CTA will affect millions of new and established businesses. It requires certain businesses to submit beneficial ownership information (“BOI”) to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”). The aim of the CTA is to address illicit activities by gathering information about the ownership of specified entities engaging or operating in the U.S market. Activities targeted by the CTA include money laundering, tax evasion, and terroristic financing.
The CTA undoubtedly leaves small business owners with plenty of questions. One of the most obvious is, “Who is considered a beneficial owner of a company?” According to the act, someone qualifies as a beneficial owner when they have a substantial ownership stake in a company. This ownership can be direct or indirect. One of the following criteria must be met to fall into this category. First, an individual is included if they have major influence on a reporting company’s decisions or operations. A business owner may also be included if they own 25% or more of a company’s shares. Lastly, individuals with similar levels of control over a company’s equity are considered beneficial owners. Based on this set of criteria, it’s clear that a significant number of people will be required to report BOI under the new CTA.
In addition to identifying who the CTA applies to, most are probably wondering what BOI should be reported. This information can vary from company to company depending on when they were established. If a business is established after January 1, 2024, it is required to submit information on the business, beneficial owners, and company applicants. Reported information may include names, birthdays, addresses, and ID numbers. Businesses established prior to 2024 are not required to provide information on a company’s applicants. Companies may also be responsible for providing legal names, business addresses, trademarks, and taxpayer ID. Surprisingly, annual reporting requirements have not been set yet. However, that could change in the future. It seems unlikely that the initial filing period will be the only time a business is required to report.
Finally, after an owner or owners have gathered required information, they still need to report it. How does this process work? Again, the process sometimes varies for different businesses. If a business was established prior to January 1, 2024, it has a filing deadline of January 1, 2025. In contrast, businesses established between January 1, 2024 and January 1, 2025 have 90 days to file their report. The 90-day timeline begins after a business’s notice of formation or public announcement (whichever happens first). In the future, businesses created after January 1, 2025 will have 30 days (after notification or public announcement) to submit an initial report. It’s important to note businesses will not be charged a fee for their submission of a report. Additionally, electronic forms are accessible on FinCEN’s website to make the process smoother.
Businesses can file and submit BOI reports on their own. However, it is an additional task for small business owners already juggling a busy schedule. Understanding the CTA and all it entails may be difficult or confusing for some owners. Others may not be confident in where they stand or if they even fall into the category of beneficial owner. Thankfully, the experienced attorneys at Strause Law Group can assist you with completing these reports and maintaining compliance with the CTA. Our attorneys provide peace of mind by letting clients know how the new CTA applies to their business and what they are required to report. Contact our office today for a consultation.