Navigating the Corporate Transparency Act: Essential Compliance Guidelines for 2024
By Jay A. Goldman, CPA
As of January 1, the Corporate Transparency Act (CTA), comes into effect and introduces new reporting mandates for U.S. companies to bolster transparency and combat financial crimes.
Key to the legislation is the requirement for detailed information about companies and their “Beneficial Owners” to be reported to the Financial Crimes Enforcement Network (FinCEN).
Defining the Beneficial Owner
Under the CTA, a 'reporting company' is broadly defined. It encompasses any corporation, limited liability company (LLC), or similar entity created or registered to do business in the U.S. by filing with a secretary of state or similar office of a U.S. state or tribal government.
- For more information about the Corporate Transparency Act, including the 23 types of companies exempt from having to report, visit: https://www.fincen.gov/boi.
A pivotal aspect of the CTA is identifying and reporting beneficial owners of these entities, defined as individuals who either exercise substantial control over the company directly or indirectly or hold an ownership interest of 25 percent or more.
This includes senior officers, individuals with the power to make significant decisions, and those with the authority to appoint or remove senior officers or board members.
What information do reporting companies have to disclose?
Companies need to report the following:
- Full legal and trade names
- Principal business address (no P.O. boxes)
- Jurisdiction of formation or registration
- Taxpayer Identification Number (TIN) or foreign equivalent
Beneficial owners must report:
- Full legal name and date of birth
- Residential or business address
- Government-issued photo ID details
- Image of the ID
Additional requirements for companies formed after January 1, 2024
Companies formed after January must identify at least one, but at most two, company applicants, defined as either a direct filer or an individual who controls the filing action. Company applicants must also provide the same detailed information required for beneficial owners.
Filing deadlines and penalties for non-compliance
Reporting companies established before January 1, 2024, must file their reports by January 1, 2025. Companies formed next year and beyond have 30 days from creation or registration to comply.
Companies must file their reports electronically through the Beneficial Ownership Secure System (BOSS), which will become operational on January 1, 2024.
Failing to comply with the new regulations carries severe penalties, including:
- Civil penalties: $500 per day until compliance.
- Criminal penalties: Fines up to $10,000 and up to two years in prison.
There is, however, a 90-day grace period for correcting unintentional errors.
With the impending implementation date, companies must begin preparing now to ensure they meet the new reporting requirements called for under the Corporate Transparency Act.
Your attorney is best suited to help your company navigate the new requirements and ensure you and your business avoid the substantial penalties associated with non-compliance.