January 1, 2024, the federal Corporate Transparency Act (“CTA”) went into effect. This new legislation effects a large number of entities. The purpose of the CTA is to create a national database of companies in the United States that identifies the human beings behind each of the companies. The law is intended to combat money laundering, terrorism, tax evasion, and other crimes.
The CTA applies to almost all limited liability companies (LLCs), corporations, limited partnerships (LPs), and other closely held entities. An entity governed by the CTA will be required to file certain reports with the federal government regarding the identities of those individuals who are “beneficial owners” of the entity. There are 23 categories of exempted entities, including charities, large operating companies (20 or more employees and $5 million or more in revenues), and certain types of other entities that are already highly regulated (e.g., banks, public companies, insurance companies, etc.).
The reports required by the CTA are filed online at https://www.fincen.gov/boi. Companies that must comply with the CTA must meet certain deadlines in filing their reports. Companies formed before January 1, 2024 have until January 1, 2025 to file their initial reports. Companies formed on or after January 1, 2024 have ninety (90) days from the date of formation to file their initial reports. Companies formed on or after January 1, 2025 have thirty (30) days from the date of formation to file their initial reports. When any information about the reporting company or one of its Beneficial Owner changes, the entity must file an updated report within thirty (30) calendar days of when the change occurs.
The CTA provides for both civil and criminal penalties for violation of the law. Willful failure to report complete or updated information and willful submission of false or fraudulent information can result in criminal penalties, including a fine of up to $10,000 and imprisonment for up to two years.
To determine if your entity will be affected by this new legislation, please contact a lawyer for individualized advice on what you need to do to be compliant with the new legislation. Please feel free to reach out to one of Dodson Parker Behm and Capparella’s experienced business services team members who are ready to walk you through this process.