ATTN Small Biz Owners! New Reporting Requirements in 2024
There’s been a lot of buzz about the Corporate Transparency Act (CTA) and today we’re going to break down what it is and what you need to know. This is a very serious important topic – this law affects every small business owner – and there are some pretty dramatically steep penalties for not complying (including jail time! 🤯)
The Corporate Transparency Act was passed 4 years ago – but with an effective date of 1/1/2024 – which is why there’s so much conversation around it now.
It’s a federal law designed to bring more transparency into the ownership structures of certain businesses. Its primary goal is to combat illegal activities like money laundering and terrorism financing by requiring businesses to disclose information about their beneficial owners.
The agency who will be enforcing this is FinCEN – the Financial Crimes Enforcement Network, which is a division of the Department of the Treasury.
Traditionally, these are the folks who are looking at bank accounts that are being opened, large amounts of money being moved around, etc – but since there are so many things that can be hidden behind a corporation, they need more transparency to know where they should be targeting their efforts.
If you own a business, you will need to file a Beneficial Owner Information Report (BOI) with FinCEN by the end of 2024. This report will list anyone in the entity who has “substantial control” and “beneficial ownership“ of 25% or more. This report will have you provide your Name, Date of Birth, Social Security Number, Driver’s License or Passport, as well as your current addresses. This information will not be shared publicly – it’s kept private and just used for FinCEN to verify the ownership of the companies. It should be information that is all very easy for you to provide/upload.
If you move/change your address, you have 30 days to update this information with them to stay in compliance.
When you create a new entity, you will have 90 days to file your BOI with FinCEN – we imagine that you won’t be able to open a new bank account in that new business’ name without your BOI confirmation, so you should likely plan to do it faster than the 90 days.
Basically, it’s who the owners are of the business. If you are the only owner of your business, this is just you. Most of the businesses we support here at Empowered Profit will fall into this easy category of one or two owners who will need to have their information reported.
There is a “Large Company Exemption”, for those companies with 20 or more full time employees on payroll and more than $5M in operating revenue. Companies of this size are already on their radar so they don’t need more information about them.
There’s also an “Inactive Entity Exemption”, for businesses established before 1/1/2020 with no transactions in the last 12 months. If that’s the case, you won’t have to file anything. Here’s the thing, though – FinCEN doesn’t know that your entity is inactive. They are going to be going down a list from the State Registration Departments, The IRS Federal IDs issues, etc. and so while you may not be required to file a report for your old, inactive company – you will still need to tell them that, and there’s no way to do that proactively. So you will get a letter from them about being in non-compliance that you will then have to reply to.
Better to just skip this and close out those old companies that you aren’t using anymore.
You will want to work with a lawyer to make sure things are properly dissolved with your state/the IRS so you can skip the nastygrams that are sure to come!
Also, if you have folks on your company paperwork that aren’t actually partners any longer, you need to get your corporate docs in order this year so you can file these reports accurately.
You will need to (please don’t try and do this alone, it needs to be done correctly)
The penalties are really severe for this, they really are taking this very seriously and staffing up enforcement for these. It’s $500 per day and up to 2 years of jail time! Yes – for not filing the paperwork. So, this is something you will want to be sure you are staying on top of!
Since this relates to your business and how it’s set up, it might make it sound like it’s an accounting thing – but it’s actually on the legal side of your business, because it’s about reporting on the legal ownership structure of your company.
➡️ Here’s a great website ⬅️ that goes into more details with more FAQs as well.
If you have specific questions about this, you will want to talk with your lawyer – but until the forms & the portal are released, there’s not a lot that anyone knows about this.
While the Corporate Transparency Act introduces new responsibilities for small business owners, it also underscores the government’s commitment to maintaining a fair and transparent business environment. By understanding your responsibilities, you will be able to easily take care of this for your business.
Reach out for support if you need it and continue building your entrepreneurial dreams!
This is provided as information only and as a starting point for a conversation with your own legal and accounting team, this should not be considered legal or financial advice.
All of these decisions are based on a number of factors and we cannot guarantee that you will experience any specific results based on any information provided. Please speak with your own retained professionals to ensure that you are making the best decisions for your business & personal situation.
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