Corporate Transparency Act Penalties Coming January 1: How to Avoid Them

November 17, 2023

By: Matt C. Cooper

The Corporate Transparency Act (CTA), implemented as part of the Anti-Money Laundering Act of 2020, introduces significant reporting requirements for businesses of all sizes in the United States. Enforced by the Financial Crimes Enforcement Network (FinCEN), the CTA aims to enhance transparency by requiring businesses to disclose certain Beneficial Ownership Information (BOI) into a database accessible by certain law enforcement agencies. This change impacts a broad spectrum of entities of various sizes operating in various industries. In consideration of the CTA’s looming effective date of January 1, 2024, Fairfield and Woods has compiled this brief synopsis of the act.

Key Points:

  1. Reporting Requirements: Reporting Companies are required to submit extensive information, including legal names, dates of birth, addresses, and unique identifying numbers for beneficial owners and company applicants. This information must be reported initially and updated within thirty (30) days of any changes.
  2. Reporting Companies: The term includes both domestic and foreign companies, and encompasses various entities formed or registered under state or tribal laws. A main catchall in the definition of Reporting Company includes “[entities] created by the filing of a document with a secretary of state or similar office under the laws of a State or Indian Tribe.”
  3. Exemptions: There are twenty-three (23) exemptions from the definition of Reporting Company, including exemptions of certain industries and businesses already regulated by other federal government arms.
  4. Information Disclosure: Reporting Companies must file BOI reports via a government-controlled secure online system, including information about the company, beneficial owners, and company applicants.
  5. Penalties for Non-Compliance: Non-compliance with CTA reporting requirements can result in steep penalties, including civil fines of up to $10,000.00 per day and criminal penalties of up to two years in prison.

As the January 1, 2024, effective date approaches, businesses need to proactively prepare for CTA compliance. This involves appointing individuals or legal counsel, amending governing documents, and exploring effective methods for tracking and managing Beneficial Ownership Information. Understanding the nuances of the CTA is crucial to avoid severe penalties.

To learn more about how to prepare your business for January 1, 2024, please reach out to one of Fairfield and Woods, P.C.’s corporate attorneys.

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