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Understanding the Corporate Transparency Act

WARNING: Be on alert for scams offering help with your reporting compliance with the Corporate Transparency Act. Your personal information may be at risk.

The Corporate Transparency Act (CTA) was enacted by the United States Department of the Treasury in 2021 and took effect in January 2024. It addresses growing concerns about the misuse of entities for corruption and financial crimes. Before its enactment, it was relatively easy for individuals to create shell companies without disclosing the owners. This lack of transparency facilitated various illegal activities, posing significant challenges for law enforcement and regulatory agencies. 

Legal Consequences for a Failure to Comply

Under the Corporate Transparency Act, companies are mandated to report Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN), a bureau of the United States Department of the Treasury. Failure to adhere to these requirements carries severe penalties. Filing a false report or not filing at all can result in fines of up to $10,000 and imprisonment for up to two years. However, companies that submit incorrect information can file a corrected report without penalty within 90 days.

Those entities required to file a report include corporations, limited liability companies, and similar entities registered to do business in the United States. Business owners must understand their obligations under the Corporate Transparency Act and take proactive measures to ensure compliance.

Certain Companies Deemed Low-Risk are Exempt from Filing Beneficial Ownership Information.

There are 23 types of entities that are exempt from the CTA reporting obligations but those exceptions for most of our clients will not apply. A few of the more relevant exemptions are for (i) “large operating companies” (those with more than 20 full-time US employees having , an operating location in the US and more than $5.0 million in gross receipts or sales from US sources, as reported on the prior fiscal year tax return), (ii) certain tax-exempt entities, and (iii) certain wholly-owned subsidiaries and (iv) inactive entities.

Who are Beneficial Owners? 

Beneficial owners are persons who, directly or indirectly, exert substantial control over a reporting company. Examples are those holding positions as senior officers within the company, those who own or control at least 25% of the ownership interest in a reporting company, or entities where ownership interests are held through a trust. Beneficial Owner Information is stored in a confidential government database and is accessible only to law enforcement and certain regulatory agencies.

Ensuring Compliance with Guidance from Legacy Law Associates

Understanding your obligations under the Corporate Transparency Act is imperative if your business falls within the category of a reporting company. Compliance may necessitate implementing programs to mitigate risks, such as developing internal policies and procedures and establishing ongoing monitoring and reporting mechanisms. At Legacy Law Associates, we offer tailored services to assist clients in navigating CTA requirements effectively.

To learn more about the Corporate Transparency Act and your legal obligation to report Beneficial Owner Information, contact Legacy Law Associates. Our law firm prides itself on offering comprehensive corporate law and regulatory compliance services. We can offer guidance on identifying beneficial owners and preparing and submitting the necessary report to FinCEN. Trust Legacy Law Associates to support your compliance efforts and safeguard your business against potential penalties.

Contact Legacy Law Associates at (386) 252-2531 to learn more about the Corporate Transparency Act. Schedule an appointment to speak with our experienced attorneys at our Daytona Beach, Florida, office to ensure your business remains compliant in today’s evolving regulatory compliance landscape.