What is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) was passed by Congress on January 1, 2021, as part of the National Defense Authorization Act of 2021. Congress passed the CTA to better enable critical national security, intelligence, and law enforcement efforts to counter money laundering, the financing of terrorism, and other illicit activity. The CTA establishes uniform beneficial ownership information (BOI) reporting requirements for certain types of corporations, limited liability companies, and other similar entities created in or registered to do business in the United States. The CTA authorizes the Financial Crimes Enforcement Network (FinCEN) of the United States Treasury Department to collect ownership information and disclose it to authorized government authorities and financial institutions, subject to effective safeguards and controls.
A final rule implementing the BOI reporting requirements of the CTA was issued on September 29, 2022.
Who will be impacted?
Small businesses will mainly be impacted. Both domestic companies and foreign businesses who are registered to do business in the United States will need to comply with the CTA if they meet the criteria.
Who is a beneficial owner?
The CTA defines “beneficial owner” to mean, with respect to an entity, an individual who, directly or indirectly, through any contract, arrangement, understanding, relationships, or otherwise:
exercises “substantial control” over the reporting entity, or
owns or controls at least 25% of the “ownership interests” of the entity.
When is the initial report due?
Entities created before January 1, 2024, are required to file on or before January 1, 2025;
Entities created on or after January 1, 2024, are required to file within 30 calendar days of earlier of:
Date received actual notice of creation or;
Date the Secretary of State first provides public notice of creation.
BOI will not be accepted prior to January 1, 2024.
What are the penalties for noncompliance?
Fine of not more than $10,000, not more than 2 years of jail.
Civil penalty, not more than $500 per day.
Possible liability for person causing failure to report.
Unlawful to willfully provide false information.
Unlawful to willfully fail to report BOI.
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We at Valla & Associates will continue closely to monitor developments on the subject and will continue to advise our clients on this matter. Feel free to contact us if you need any assistance or advice.
Requests for information or insights on the issue discussed in this article may be addressed to elizabeth.lee@vallalaw.com. This article is for information purposes only and does not constitute legal advice. The information contained herein may be outdated or incomplete and shall in no way be taken as an indication of future results. The transmission of this article is not intended to create, nor does its receipt constitute, an attorney-client relationship between preparer and reader. You should not act on the information contained in this article without first seeking the advice of an attorney.