Starting on January 1, 2024, the Corporate Transparency Act (“CTA”) becomes effective. This new law will affect more than 32 million businesses. And yours is probably one of them!
What is the CTA?
The CTA requires businesses to give detailed information to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) about the business, its Beneficial Owners, and the people who filed documents with a state agency necessary to create the business. It was passed as part of the anti-Money Laundering Act in 2021 to assist law enforcement investigating financial crimes.
Who Needs to Comply?
All domestic companies that file paperwork with a state or Indian tribe in order to operate as a corporation, limited liability company or other corporate entity. Additionally, foreign businesses registered to do business in the United States must comply. There are 23 exemptions, which include businesses with more than 20 full-time employees AND over $5M in revenue, and businesses that report similar information under other federal laws, such as banks or businesses that report to the SEC.
Who is a Beneficial Owner?
The CTA defines a “beneficial owner” as someone who owns, directly or indirectly, at least 25% of the business or who has substantial control over the business. Substantial control can be through (i) your position as a senior officer (e.g., president, CEO, CFO, etc.), (ii) having the power to appoint or remove senior officers, (iii) making important decisions, or controlling the business in other unique ways. And when it comes to control, the CTA considers both direct and indirect control, which can include rights from financial arrangements with the business, control over a parent company of the business, or any other contract or relationship with the business that provides control business decisions.
What happens if I don’t comply?
The filing requires the names, addresses, and copies of government issued IDs for all Beneficial Owners. And if you don’t comply, you risk fines of up to $10,000 and the possibility of 2 years in prison. Yes, that’s not a joke!
Is there a deadline?
If your business is in existence now or you will form a business prior to 12/31/23, you must file in 2024. If you create your business any time after 1/1/24, you will have 90 days to complete the filing.
Will I have to file every year?
No, unless there is a change in ownership (e.g., you take on additional owners with 25% or more ownership) or other major changes, you will only have to file once.
FinCen is still finalizing the logistics for the CTA. As such, the requirements, processes and deadlines may change from here until the beginning of the year. However, here at Ser & Associates, we are already compiling our list of clients and businesses that will have to file so as soon as we start the year, we will be “at the ready”!
If you would like assistance complying with the Corporate Transparency Act, please contact us at 305.222-7282 or [email protected].
Also, please be sure to visit us at www.Ser-Associates.com and follow us on Instagram, Facebook, and/or LinkedIn to learn more about how we can further assist you and your business!
