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What is the Corporate Transparency Act?

What is the Corporate Transparency Act?

Guest Blog

What is the Corporate Transparency Act? 

According to a release from the United States Chamber of Commerce, The Corporate Transparency Act (CTA) may require your small business to report information about ownership to the government. Under the CTA which went into effect on January 1, 2024, many U.S. small business owners are required to file corporate transparency reports with beneficial ownership information.


For most eligible businesses, the filing deadline is January 1, 2025. Those who fail to file by this deadline or update this information could face fines up to $10,000, in addition to civil penalties of up to $591 per day.

The CTA was enacted in 2021 to combat illicit activity including tax fraud, money laundering, and financing for terrorism by capturing more ownership information for specific U.S. businesses operating in or accessing the country’s market. Under the new legislation, businesses that meet certain criteria must submit a Beneficial Ownership Information (BOI) report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).

This report provides details identifying individuals who are associated with the reporting company. All reporting companies must provide their legal name and trademarks, as well as their current U.S. address, which could be either the address of its main business site or, for foreign-based companies, their U.S. operational location. They’ll also need to provide a taxpayer identification number and specify the jurisdiction where they were formed or registered.

Businesses registered or established post-January 1, 2024, must provide information regarding the business, its beneficial owners, and its company applicants. To include owners’ and applicants’ names, addresses, birthdays, and identification numbers, i.e., a license or passport number. Businesses established before that date can omit information regarding company applicants, and must only submit information on the business and beneficial owners.

In addition to the required initial filing, there are requirements to update the original filing when things change and the timeline to report these changes can be as short as 30 days. Examples include if a beneficial owner changes their address or legally changes their name due to marriage or divorce.

Reporting companies have a limited time to file their initial BOI reports:

· For qualifying reporting companies established before the above date, the filing deadline is January 1, 2025.

· Those created between January 1, 2024, and January 1, 2025, will have 90 days from either the actual notice of formation or public announcement, whichever comes first, to file.

· Businesses established on or after January 1, 2025, will have 30 days from notification or public announcement of their formation to submit their first report to FinCEN.

· Businesses must submit any corrections or updates to previously filed information within 30 days.

Businesses will not incur a fee for submitting their reports, and electronic forms are available on FinCEN’s website - https://www.fincen.gov/boi  For more information log on to the US Treasury website - https://home.treasury.gov/news/press-releases/jy2015

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Gray Poehler is a volunteer with the Naples Chapter of SCORE, Counselors to America’s Small Business. To ask a question or request free and confidential business counseling, call 239-430-0081 or log on to https://www.score.org/naples/local-mentors

 

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