If you’re running a small business, chances are you’ve got enough on your plate without worrying about new government regulations. But the Corporate Transparency Act (CTA) is important to know, especially since it went into effect in January 2024.
As you continue with this article, be aware your first deadline may have already passed. Find out below what you need to do. You might need to do it immediately and you might need to file by December 31, 2024.
Do not panic! Let’s walk through the steps so you can understand how it affects your business and what you need to do to comply.
What is the Corporate Transparency Act?
The CTA is part of the U.S. government’s efforts to combat illegal activities like money laundering, tax fraud, and terrorism financing. To do this, the CTA requires certain businesses to file a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN).
What does this have to do with you and your small business? The goal is to make sure shady individuals can’t hide behind anonymous shell companies. For you, that means a bit of extra paperwork, but nothing you can’t handle.
Does the CTA Apply to My Business?
If your business is a corporation, LLC, or a limited partnership, and you created it by filing paperwork with your state (or a comparable office), you’ll need to comply with the CTA.
But there’s good news: if you’re a sole proprietor or a general partnership, you’re off the hook because you didn’t file with the state to form your business. The same goes for certain exempt businesses, like large companies with more than 20 employees or those with more than $5 million in revenue.
If you’re unsure, this is a good time to check your business formation documents or talk to your attorney.
What Do I Need to Report?
You will need to file a report with FinCEN. FinCen is short for Financial Crimes Enforcement Network which is a division of the United States Treasury. The types of information you will be reporting include:
- Your company’s legal name and address
- Information about your company’s beneficial owners. Beneficial owners are anyone who directly or indirectly owns or controls at least 25% of the company. This includes individuals who have major influence over the company like your CEO or President.
- The name of your company applicant, if your business was formed in 2024 or later (this is the person who filed your company’s formation paperwork).
Keep in mind, you’ll need to complete all the information for the CTA report one time or until something changes. Any changes related to the company applicant, business and its beneficial owners will need to be updated. Those changes or updates will need to be updated within 30 days of the said change. For example: if someone sells their stake in the company or there’s a change in leadership.
When Do I Need to File?
If your business was formed before January 1, 2024, you’ve got until January 1, 2025, to file your initial report. If your business was formed in 2024, you have 90 days from the date of formation to file. What if you didn’t know about the CTA and it’s been more than 90 days? File immediately.
While there has been a valiant effort to communicate the CTA to small business owners over the past year, we are certain there are individuals who missed the memo. If you missed the memo, file now.
And here’s a friendly reminder: failure to file on time can result in some pretty hefty fines—up to $500 per day. Ouch! Plus, if the failure is intentional, it could even result in criminal charges, a.k.a. jail time. So, it is best to get this done sooner rather than later.
Why Should I Care?
Aside from avoiding those fines, complying with the CTA helps ensure your business is on the up and up. The law is designed to prevent criminals from using U.S. businesses for illegal activities. Compliance means your business is part of keeping things transparent and honest.
It’s not just about protecting your business; it’s about protecting the integrity of the entire business landscape.
How Do I File?
FinCEN has an online portal where you can file your Beneficial Ownership Information (BOI) report. If this sounds a bit overwhelming, don’t hesitate to consult your accountant or legal advisor to make sure you get everything right. There is a great five-minute video tutorial on their site. We recommend taking those five minutes it will likely ease any anxiety you might have.
While filing might seem like “one more thing,” think of it as a quick check-up for your business. Once it’s done, you’re good to go—and you’ve protected yourself from unnecessary penalties down the road.
In short, the CTA is here to ensure businesses operate transparently, and complying isn’t as daunting as it sounds. So, take a deep breath, gather your info, and file that report. Your future self will thank you for it! If you have questions and need legal assistance with filing your small business information, contact us at 208-939-7658 or email us at info@idahoestateplanning.com.
