Dear Anxious in Appleton, The Corporate Transparency Act (CTA) is indeed a game-changer for businesses like yours, so you’re wise to be asking about it now! The CTA imposes new filing requirements on many companies, and failure to comply can result in steep penalties. Let me walk you through what’s required and what you need to know to stay on the right side of the law. What is the Corporate Transparency Act (CTA)?The CTA is a federal law designed to prevent illegal activities such as money laundering and terrorist financing by requiring businesses to report detailed information about the individuals who own or control them. It applies to almost every corporation, limited liability company (LLC), and limited partnership. The report, known as a Beneficial Ownership Information Report, is filed with FinCEN (the Financial Crimes Enforcement Network), a bureau of the U.S. Treasury. The law is aimed at increasing transparency by identifying the individuals behind these entities, particularly small companies that might be used to mask the identities of those involved in criminal activities. Who Needs to File?Most corporations, LLCs, and limited partnerships must file a Beneficial Ownership Information Report with FinCEN. However, there are 23 exemptions, including for publicly traded companies, banks, and large operating companies that meet specific criteria (more on that later). But if your company doesn’t fall into one of these categories, you’ll need to file. When Are the Filing Deadlines?The timing for filing your initial report depends on when your company was formed:
But it doesn’t stop there! If there are any changes to the information in your Initial Report (such as a change in a beneficial owner’s address), you are required to file an Updated Report within 30 days of the change. Additionally, if your company discovers an error in a previously filed report, you must submit a Corrected Report within 30 days of becoming aware of the mistake. What Information Must Be Included?The CTA requires you to report information about your company and the Beneficial Owners—the individuals who own or control the company.
A Beneficial Owner is any individual who directly or indirectly owns or controls at least 25% of the company or who exercises substantial control over the company, even without ownership—this could include senior officers or trustees. The CTA also requires that the Company Applicant—the person who filed the paperwork to form the company—provide their information if the company was formed after January 1, 2024. Penalties for NoncomplianceThe penalties for failing to comply with the CTA can be severe:
FinCEN ID: A Simplifying ToolFinCEN provides an option for Beneficial Owners and Company Applicants to apply for a FinCEN ID, which allows them to submit their personal information directly to FinCEN rather than through the company. This can be especially useful for:
Once an individual has a FinCEN ID, they can simply provide that ID to any company they have an ownership interest in, rather than re-submitting their personal information. ExemptionsNot every business has to file under the CTA. One key exemption is for large operating companies that meet all three of the following criteria:
Next Steps for Your Company
Final ThoughtsAnxious in Appleton, the CTA represents a significant new compliance obligation, but with the right procedures in place, you can avoid the hefty fines and penalties associated with noncompliance. Make sure you’re keeping track of your deadlines, identifying all Beneficial Owners, and staying on top of any changes that require an Updated or Corrected Report. If you need help navigating this new law or want more guidance on how to set up your compliance procedures, feel free to reach out to me at NextGen Legal. We’re here to ensure your business stays compliant and worry-free. Warm regards, Attorney Bob P.S. Have more questions about the CTA or corporate compliance? Contact us at NextGen Legal for tailored guidance to keep your company on the right track! About Attorney Bob
At NextGen Legal, we're transforming the traditional law firm model. Bob’s extensive experience in labor and employment law has been instrumental in shaping a service that offers both day-to-day legal counsel and rapid response for emergent issues. We strive to empower our clients with the knowledge and strategies necessary to navigate the legal landscape effectively and make confident employment decisions, without the fear of unexpected costs. Rated a Rising Star by SuperLawyers (an accolade reserved for only 2.5% of attorneys in Wisconsin), Bob provides strategic legal advice and counsel to companies of all sizes, helping business leaders make confident, informed decisions. His expertise spans employment law, regulatory compliance, litigation, safety, corporate strategy, and risk mitigation. Bob excels in transforming complex legal challenges into clear, actionable business solutions, offering strategic guidance to leadership teams. Disclaimer: Please note that the information provided above is for informational purposes only and should not be construed as legal advice on any subject matter and the scenarios presented in "At Your Service with Attorney Bob" are based on hypothetical fact patterns. The responses provided are for informational purposes only and should not be construed as legal advice on any subject matter. No recipients of content from this column, clients or otherwise, should act or refrain from acting on the basis of any content included in the column without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient’s state. The content of "At Your Service with Attorney Bob" and "Legal Alerts from Attorney Bob" contains general information and may not reflect current or subsequent legal developments, verdicts, or settlements. This content is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship. Readers of this column are encouraged to seek out their own legal counsel for any specific legal concerns they may have. Alternatively, readers may reach out to Attorney Bob at NextGen Legal for specific legal guidance tailored to their unique situation. Contact information is as follows: Email: [email protected] Website: www.nextgenlegalsc.com We welcome your inquiries but urge you to make informed decisions regarding legal matters.
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