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What The Corporate Transparency Act (CTA) Means For Your Business

The introduction of the Corporate Transparency Act (CTA) marks a turning point in how our government approaches business regulation. One of the aspects of this legislation that has forced us to give it so much attention is the impact it has on small business owners. Though we will elaborate more on that in the following sections, it has consequences for relatively small LLCs with assets such as family-owned vacation homes and rental properties. 

Remember that this Act was enacted as part of the National Defense Authorization Act 2021. At its core, it’s meant to increase national security by preventing people from using businesses to launder money, finance terrorist operations, or engage in other illicit activities. Because of the CTA, small businesses and other entities must disclose who their beneficial owners are—a fundamentally important term for remaining compliant. The CTA makes it harder for people to stay anonymous by hiding behind corporate structures. 

The Timeline for Compliance Deadlines

One of the reasons there is some general confusion is that attorneys need first to know more about your business before they can tell you the definitive timeline. This is because the deadlines vary based on when the business was formed. For example, if a business existed before January 1, 2024, they have until December 31, 2024, to file their initial reports with the Financial Crimes Enforcement Network (FinCEN). If the business was formed after January 1, 2024, they must file their reports within 30 days of being formed. To add an additional layer to this, any business with changes to beneficial owners after January 1, 2024, must also update their information with FinCEN within 30 days of the change. 

Beneficial Ownership Explained

We’ve already used the term beneficial ownership a few times, and reporting companies must give these names to FinCEN. Beneficial owners are people who directly—or indirectly—exert significant control over the business or own at least 25% of the ownership interest. (The term “significant control” also lends itself to interpretation, but these are the types of questions that you should speak to professional legal counsel about.) Along with providing FinCEN with their full legal names, you must include birthdates, addresses, and unique identifying numbers such as a passport and driver’s license number. 

The Consequences of Non-Compliance are Severe

The confusion surrounding the CTA is heightened when people discover how significant non-compliance penalties are. Civil fines start at $591 per day (inflation adjusted each year); criminal consequences can include jail time of up to two years and a $10,000 fine. The severity of the punishments simply reflects the government’s commitment to combating financial crimes by forcing companies to be more transparent. 

Move Forward with Proper Legal Guidance 

In light of the complexities and strict penalties associated with the CTA, it’s paramount for business owners to work through their filing obligations with appropriate legal support. Whether your business predates the Act or is just starting, compliance is essential for your peace of mind and legal security. 

Norton Pelt will provide clear, actionable advice to ensure your business complies with the CTA. Schedule a consultation with us today to safeguard your future and stay ahead of compliance deadlines. Let us represent you with the strength of the mountain and ensure that your business foundation is as solid and transparent as our commitment to you.

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