Making it in small business gets more difficult every year, and 2024 will be no exception. A new law, the Corporate Transparency Act takes effect on January 1, 2024 that requires most private companies in the United States to file information about their beneficial owners and the people who applied for the corporate registration with the Financial Crimes Enforcement Network of the Department of the Treasury (“FINCEN”). The information must be provided electronically through a portal that is still being developed by FINCEN.
If your entity was created by filing with your state’s or Indian Tribe’s secretary of state (or similar office) or if your entity was formed under the laws of a foreign company but is registered to do business in the U.S., then your company is designated a “Reporting Company”. This definition includes corporations, limited liability companies, limited partnerships, limited liability partnerships, professional corporations, professional limited liability companies and business trusts.
If you form your company after January 1, 2024, you also have to disclose the identities of those who applied for the company’s registration in its founding jurisdiction.
If your company violates the CTA each violation can result in a civil penalty of up to $500 per day, a fine of up to $10,000 and up to 2 years of imprisonment. There is, however, an exemption from civil and criminal liability if an individual voluntarily and promptly corrects an inaccurate report no later than 90 days after submission of an inaccurate report.
Since the information that companies are obligated to report is very sensitive, the CTA does impose strict confidentiality, security, and access restrictions on the data FinCEN collects. Still, your information can be disclosed to a statutorily defined group of governmental authorities and financial institutions. Federal agencies will have access to the information when it will be used in a national security or law enforcement activity. A court can give state, local, and Tribal law enforcement agencies permission to obtain this information as part of a criminal or civil investigation. Foreign government access is limited. Finally, a financial institution’s regulator can obtain information that has been provided to a financial institution it regulates for the purpose of performing regulatory oversight that is specific to that financial institution. With the consent of the Reporting Company, FinCEN may also disclose Beneficial Owner information to financial institutions to help them comply with customer due diligence requirements under applicable law. In other words, your information will be available for a variety of uses by federal, state, and local governments as well as financial institutions.
There are exemptions that might apply in your company’s situation but the compliance date is fast approaching so be sure to ask your attorney about your obligations under the CTA. The attorneys and staff at Shoffner & Associates are ready to help you prepare to comply with the CTA. Just give us a call.
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Freya Allen Shoffner, Esq.
Shoffner & Associates
Counselors to Small Business and Families.
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