The Corporate Transparency Act (CTA)

In this article, learn more about your legal obligations regarding the Corporate Transparency Act (CTA) and Financial Crimes Enforcement Network (FinCEN) Beneficial Ownership Information (BOI) Report.

The Corporate Transparency Act (CTA) took effect on January 1, 2024. This legislation aims to improve corporate transparency and aid law enforcement in addressing illegal financial activities such as money laundering and fraud. The CTA will affect most small- and medium-sized businesses, including LLCs, corporations, and registered partnerships. These entities will be required to report information to the Financial Crimes Enforcement Network (FinCEN) regarding the business, its beneficial owners, and other relevant individuals.

The CTA generally applies to any entity classified as a “Reporting Company”, which typically includes businesses with fewer than 20 employees and less than $5 million in annual revenue. However, there are various exceptions to this rule. As such, businesses must carefully assess their status to determine if they meet the criteria for a Reporting Company, taking into account these exceptions.

For businesses established before January 1, 2024, the deadline to assess whether they qualify as a Reporting Company and to submit an initial Beneficial Ownership Information (BOI) Report is January 1, 2025. This means that if your business was formed before the effective date, you have roughly a year to determine your reporting obligations and file the necessary report. Given that the regulations are still evolving, it may be wise for businesses to revisit this issue starting in the second quarter of 2024.

Newly established entities, however, will not have the same grace period. Businesses formed on or after January 1, 2024, must file their initial BOI Report with FinCEN within 90 days of formation. After the initial report, businesses will have an ongoing duty to update their BOI Report to reflect any changes, or they may face criminal and civil penalties. Therefore, it will be crucial for Reporting Companies to develop and maintain procedures to ensure their reports are kept up-to-date.

This alert aims to inform you of a significant legal development that will affect businesses and their owners in 2024. The reporting requirements and related processes are expected to evolve.

Let the attorneys at Lancer Law know if you have any questions or need assistance with respect to your legal obligations under the CTA.

This notice is for informational purposes only and does not constitute legal advice. No attorney-client relationship is established by the distribution of this information.