Corporate Transparency Act
A new law, the Corporate Transparency Act (“CTA”), went into effect on January 1, 2024. CTA requires all “beneficial owners” (see below) of non-exempt business entities formed by filing with a governmental entity (such as the Florida Secretary of State) to report personal information (“CTA Filing”) to the Financial Crimes Enforcement Network (“FinCEN”) via their website. If your company was formed prior to January 1, 2024, you have until December 31, 2024 to file. Failure to comply with the CTA may result in civil or criminal penalties, including a daily fine indexed to inflation ($591 per day as of April 18, 2024) along with up to $10,000.00 in fines and up to two (2) years in federal prison.
Am I a beneficial owner who needs to report?
Two types of people connected to a small business generally are classified as beneficial owners and need to report personal information to FinCEN: (1) equity owners who own at least 25% of the total equity and (2) individuals who exercise “substantial control” over the business. More generally, any senior officers or anyone who makes important business decisions is required to report personal information to FinCEN. Both the company and beneficial owners are required to report. However, CTA lists multiple different types of businesses that don’t have to report, if you want to find out if your business is exempt from the requirements, click here to submit an inquiry.
What do I have to report?
The company has to report (1) its legal name, (2) any DBA or fictitious names it operates under, (3) the state or jurisdiction it is organized under, (4) its physical address (not a P.O. Box), and (5) its Taxpayer Identification Number.
Any of the individuals classified as beneficial owners have to report (1) full legal name, (2) date of birth, (3) principal place of residence address, (4) driver’s license or passport number, and (5) a photocopy of such driver’s license or passport use to establish their identity.
What is the deadline to report?
The answer to this question depends on when your company was organized. If your company was organized prior to January 1, 2024, then you have until the end of this year to report. If your company is organized between January 1, 2024 and December 31, 2024, then you have ninety (90) days to report after the date of organization. If your company is organized on or after January 1, 2025, then you will have thirty (30) days to report.
Are there any continuing reporting requirements?
CTA requires updated reports anytime any of the information described above changes. Basically, anytime any of the reported information changes, including a driver’s license or passport expiring or a change in a reported address, a report containing updated information would be required within thirty (30) days. Also, if an assignment or sale of company interest causes any individuals to become beneficial owners, a report containing the new beneficial owner’s information would be required within thirty (30) days.
Still have questions?
We hope that we answered some of your questions above, but there are many legal technicalities at play here that add to the complex individual nature of each matter. If you would like to find out more information pertinent to your specific situation, please click here to submit an inquiry and a member of our Corporate department will get in touch with you.
