The Corporate Transparency Act: The Biggest Change in Small Business Filing Requirements in Decades

The Corporate Transparency Act (the “CTA”), enacted in January 2021, imposes substantial changes in small business filing obligations, accompanied by significant criminal and civil penalties for non-compliance. This legislation mandates the disclosure of ownership information, reshaping the regulatory landscape for many businesses. 

The CTA mandates that certain entities, including corporations, limited liability companies (commonly, “LLCs”), and similar entities disclose information about their ownership structure to the Financial Crimes Enforcement Network (“FinCEN”). Failure to comply with the disclosure requirements outlined in the act can result in severe criminal and/or civil penalties.

Key Provisions of the Act Include:

1. Beneficial Ownership Disclosure: Covered entities must provide details regarding their beneficial owners to FinCEN. This includes information such as names, addresses, and other identifying details of individuals with significant control over the entity.
2. Establishment of a Centralized Database:  The Act sets up a centralized federal database managed by FinCEN to house the disclosed beneficial ownership information. This database aims to facilitate access to data for law enforcement agencies investigating financial crimes.
3. Compliance Requirements and Penalties: Covered entities failing to comply with the disclosure requirements may face severe penalties. Criminal penalties can include substantial fines and up to two years in jail. Civil penalties may include $500.00 for each day the company is not in compliance. 

These changes amount to one of if not the largest change in the filing requirements relating to small businesses in decades. As businesses navigate these changes, it is crucial to understand and adhere to the new disclosure requirements to avoid potential penalties and enforcement actions. 

Though these changes in the corporate regulatory structure are new and significant, it is important to stay on top of these changes. Current guidance provides that entities filed before January 1, 2024, have until December 31, 2024 to file their initial Beneficial Ownership Information Report. Entities filed between January 1, 2024, and December 31, 2024, have 90 days to file their initial Beneficial Ownership Information Report. Entities filed beginning January 1, 2025, have 30 days to file their initial Beneficial Ownership Information Report. Furthermore, entities which have previously filed have additional applicable deadlines to file amendments and corrections as applicable. 

Contact Foster Massengill, PLLC Today 

For more information on the Corporate Transparency Act or other business law matters contact Foster Massengill, PLLC today. Lead attorney JD Foster has the experience and strategy needed to help you successfully navigate your business needs.