As of January 1, 2024, most privately owned U.S. corporations and limited liability companies have to make disclosure filings with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). Unfortunately, there are few exemptions from this Corporate Transparency Act (CTA) requirement.
What’s the purpose of these filings?
To let the government know who owns and substantially controls your business entity to allegedly prevent money laundering, terrorism, tax fraud, etc. This means the personal information of the “beneficial owners” (those who own or substantially control) each entity will be collected by the federal government.
Before now, most of this information was just collected by the states where the entities were formed or registered to do business as a foreign corporation or LLC. This new federal reporting requirement is a major step by D.C. politicians in controlling small and medium-sized businesses (SMBs) and their owners (and shaking them down for campaign contributions).
What’s the deadline for the initial filing?
It appears that for business entities formed before 2024, they have until the end 2024 to file but shouldn’t procrastinate in doing so. Imagine the filing system crashing because too many procrastinators waited until the last minute.
Any business entities formed after January 1, 2024, have just 30 days to file. Because the filing will include the entity’s EIN number (that must be procured from the IRS), that’s a tight window for entity formation, getting the EIN, and then filing with FinCEN.
What if the information you disclosed changes? For example, someone buys 40% equity in your business. Or you hire a new CEO to run the company (substantial control). You’ve got just 30 days to update that information with a new FinCEN disclosure filing.
Don’t ignore these new obligations under the Corporate Transparency Act. Work with an experienced business attorney and/or accountant to ensure compliance because breaking this law willfully can lead to penalties of up to $500 per day and up to two years of imprisonment.