More than 30 million businesses now have less than 70 days to file their initial reports under the new federal Corporate Transparency Act (CTA). Here’s the bottom line and why it matters.

What is the CTA?

The CTA requires businesses to report detailed information to the federal government about the business and the so-called “beneficial owners” of the business, that is, people who directly or indirectly exercise substantial control over the company or who directly or indirectly own or control at least 25% of the ownership interests of the company. The CTA’s stated objectives include combating illicit activities such as money laundering, terrorist financing, tax fraud, and human and drug trafficking.

Who must file?

Corporations, LLCs, and certain other types of entities organized or registered to do business in the United States are required to file an initial beneficial ownership (BOI) report with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury and keep reported information up to date. unless they meet the exemption criteria of the LTC.

The CTA regulations include 23 specific exemptions. Many exemptions apply to types of businesses that are already subject to rigorous reporting or oversight at the state or federal level.

An important exemption is that relating to “large operating corporations”. This applies to companies with more than 20 full-time employees in the United States, an operational presence in a physical office in the United States, and more than $5 million in revenue or gross sales during the previous year . There is also a “subsidiary” exemption which applies to companies whose interests are entirely owned and controlled, directly or indirectly, by one or more other exempt entities.

What are the deadlines?

• Businesses that existed before January 1, 2024 must file their initial BOI reports by January 1, 2025.
• New companies established between January 1, 2024 and December 31, 2024 must file their initial BOI reports within 90 days of their creation. Companies established on or after January 1, 2025 must file their initial BOI reports within 30 days of formation.
• Surprisingly, a company that existed before 2024 but ceased to exist before the January 1, 2025 deadline for filing initial BOI reports must nevertheless file an initial BOI report by the January 1, 2025 deadline, even if the deposit is made afterwards. the company ceased to exist. Similarly, a company that was established in or after 2024 but ceased to exist before the applicable 90 or 30 day deadline for filing initial BOI reports must nonetheless file an initial BOI report within 90 or 30 days following its creation, as the case may be. even if the deposit is made after the company ceases to exist.
• Companies must report changes to information previously submitted to FinCEN about the company or its beneficial owners within 30 days of the change.
• It is advisable to file initial BOI reports as early as possible, particularly in cases of complex structures and circumstances where information from third parties will be required for the filing.

How do I file a request with FinCEN?

The deposit is via the FinCEN CTA website. FinCEN’s CTA website also includes CTA FAQs, small business resources, and other reference materials.

What if I don’t comply?

Potential penalties for non-compliance with the CTA can be significant: willfully failing to report complete or updated BOIs to FinCEN, or willfully providing or attempting to provide false or fraudulent BOIs to FinCEN, may result in civil penalties of up to $591. for each day the offense continues (adjusted annually for inflation) or criminal penalties of up to two years imprisonment and/or a fine of up to $10,000.