Corporate Transparency Act - 2024 Filing Requirements
The purpose of this article is to review the requirements that business owners have regarding the Corporate Transparency Act. This article will cover a brief background on the Act, address who is required to file, what information needs to be provided, and the timeline for filing, as well as the penalties for failing to file.
In 2021, federal congress introduced the Corporate Transparency Act (CTA, or “the Act”) in an attempt to address money laundering schemes, terrorist financing, corruption, and tax fraud issues. The CTA created a new filing requirement which mandates that certain business owners are required to provide information to the Financial Crimes Enforcement Network (FinCEN) which outlines the owner(s) benefiting from the company. Companies include both corporations and limited liability companies (LLCs). This law has faced some backlash, as one of the main reasons that individuals utilize companies is to help create anonymity. There has been some pushback to this law, challenging the constitutionality of these requirements. The Alabama Supreme Court has held the law unconstitutional (See National Small Business Un. et al v Yellen) in which the Court ruled the CTA exceeded the constitutional limits on Congress’ power, and cannot be enforced. FinCEN has filed an appeal and that litigation is still ongoing.
In Maine, a complaint, Boyle v. Yellen, D. Me., No. 2:24-cv-00081 has been filed which also challenges the constitutionality of the Act. The complaint sites similar challenges to the Alabama case, that the Act exceeds congress’ authority, and encroaches on the states’ sovereignties in violation of the Ninth and Tenth Amendments. This litigation is still ongoing and no decision has been reached as of the date of this article.
In the meantime, 2024 is the year in which most, if not all, owners will need to file. Business owners need to determine if filing and complying with the law is in their best interest. Most businesses are going to need to file, with only a few notable exceptions. There are twenty-three (23) exempt categories, which include things like banks, government agencies, insurance companies, accounting firms, tax exempt entities and companies which have more than 20 full-time employees. Because of the types of companies that are used to avoid taxes and launder money, the law is targeted towards smaller private companies.
If your company is not an exempt company, then you must report your beneficial ownership information to FinCEN within the required timeline, or face penalties. The information that must be provided to FinCEN, among other information is, 1) the legal name of the entity, 2) the tax status of the entity, 3) jurisdiction and address of the entity, 4) legal names of all owners of the company, 5) dates of birth of all owners of the company, 6) physical residential address of all owners of the company, and 7) one form of identification of said owners, such as a driver’s license. Owners include only those which own at least a twenty-five percent (25%) stake in the company, or those who can direct the operations of the company.
This information, which is usually private, will be available to federal, state, local, and tribal officials who properly request it from FinCEN, as well as any other U.S. Federal government agency.
If your company was created prior to 2024, you have until January 01, 2025 to provide this information to FinCEN. If your company was created in 2024, then you have just ninety (90) days to file from the day you received confirmation from the Secretary of State on the formation of your company. You can file by mail, or online on FinCEN’s website. There is no cost to file, be wary of any advertisements, mail, or other correspondence which asks for a fee to file. This is a one-time filing, not something that needs to be resubmitted each year, unless there are changes to the information filed, such as the addition of a new owner.
Failure to file could result in criminal and civil penalties on both the company, as well as the beneficial owners. Civil penalties can include monetary fines of up to $500, per day, up to a maximum of $10,000. Criminal penalties can include up to two years imprisonment, which is a felony offense.
If you have questions regarding this law, or whether you should file, please contact your attorney or FinCEN directly. Rune Law is not affiliated with FinCEN or the Corporate Transparency Act. Rune Law is further not suggested, advising, or recommending that any individual or company file or not file. The purpose of this article is merely informational. If you would like to discuss this, or other business-related concerns you can reach out to our office to set up a time to meet with one of our attorneys.
