New law that affects all business owners starting in 2024
NEW – Corporate Transparency Act (CTA)
One of the most significant legislative changes affecting all small businesses starting in 2024 is the Corporate Transparency Act (CTA).
What is a Corporate Transparency Act (CTA)? The CTA was passed in 2021 by Congress to combat money laundering, tax fraud, and other illicit activities. This law requires that certain entities submit a beneficial ownership information (BOI) report to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury Department.
Key Points of the CTA:
1. Effective Date and Applicability: According to FinCEN, a reporting company created or registered to do business before January 1, 2024, will have until December 31, 2024, to file its initial beneficial ownership information report.
A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report. This 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.
Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports with FinCEN.
2. Who Must File: The CTA primarily targets smaller, privately-held businesses not heavily regulated by other government entities. This includes businesses formed by filing with a state Secretary of State or similar official. It’s estimated that about 32 million businesses and rental property owners will be affected.
3. Reporting Requirements: The BOI report requires information about the business and its beneficial owners (those who own/control at least 25% of the business or exercise substantial control over it). The report will disclose the following information about the company and the beneficial owners.
Reporting Companies Beneficial Owners
|Full legal name
|Full legal name
|Trade name under which it does business
|Date of Birth
|State or tribal jurisdiction of formation
|Drivers’ license or passport
|Federal taxpayer identification number (FEIN)
|Social Security Number (SSN)
5. Penalties for Non-Compliance: The government has instituted significant penalties for failing to comply, including civil penalties of up to $500 per day, capped at $10,000, and potential criminal penalties, including imprisonment for up to two years for willful non-compliance.
6. Ongoing Obligations: Once you file your initial BOI report, you must update it within 30 days if any included information changes.
The BOI is not a recurring filing requirement; however, you will be required to file an updated report no later than 30 days after there is a change to any of the previously reported information. Here are a few examples of changes that would require an updated BOI:
- Registering to do business with a different name
- Change in Ownership
- New CEO
- Change in address
- Owner receives new driver’s license
Noncompliance with BOI can lead to significant penalties. Business owners must carefully analyze all active and inactive entities to determine if they have a filing requirement. This is a legal matter; any questions should be directed to your trusted professional.
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Karen Baksa, CPA