The Corporate Transparency Act Explained
Key Takeaways
The Corporate Transparency Act requires companies to file Beneficial Ownership Information Reports with FinCEN.
The CTA is aimed at combating financial crimes through increased corporate transparency.
Non-compliance with the CTA can result in hefty civil and criminal penalties enforced by FinCEN.
What is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) is a law passed in 2021. The CTA is designed to increase transparency in corporate ownership by requiring certain businesses to file reports with the Financial Crimes Enforcement Network (FinCEN) identifying their owners. The goal is to cut back on money laundering, fraud, and other bad conduct by those trying to hide behind corporate shells and games.[1]
The CTA requires certain businesses to file Beneficial Ownership Information (BOI) reports. These businesses are known as “Reporting Companies.”
Who must file under the CTA?
Corporations, LLCs, or other businesses formed through a filing process with state or tribal Secretaries of State or equivalent offices must file a BOI. This includes domestic reporting companies formed in the U.S. and foreign reporting companies created abroad but registered to operate in the U.S.
According to FinCEN, 32.6 million companies will have to report in the first year, and they estimate another 5 million each additional year after that.[2]
CTA exemptions
There are a few exemptions to the filing requirements of the CTA. These exemptions include:
Large businesses: Businesses with more than $5 million in gross receipts in the previous year and at least 20 employees.
Reporting Companies already subject to anti-money laundering laws, such as businesses already subject to the Bank Secrecy Act, involved in insurance, the SEC, or other entities that must report ownership information to federal agencies.
What information must be filed in the BOI?
The BOI Report must include the following information for each beneficial owner of the Reporting Company:
Full legal name
Date of birth
Current residential address
Unique identifying number from a non-expired identification document
When does the BOI report need to be filed by?
The BOI Report must be filed within 30 days of the formation or registration of the Reporting Company. If the Reporting Company was formed or registered before January 1, 2024, the BOI Report must be filed by January 1, 2025.
Where do I file the BOI report?
The BOI Report must be filed electronically with FinCEN.[3]
Is information filed with FinCEN confidential?
Information filed with FinCEN under the CTA is confidential and cannot be disclosed to the public. However, law enforcement agencies can access this information to investigate potential financial crimes.
What happens if a business doesn’t comply with the CTA?
FinCEN is a federal agency with the authority to impose civil and criminal penalties on businesses that fail to comply with the law. These fines can be as much as $500 per day, a criminal penalty of imprisonment for up to two years, and a $10,000 fine.
Navigating the future of corporate transparency
The Corporate Transparency Act is still a relatively new law, and it’s still too early to say what additional hurdles it will present to entrepreneurs. While the law is a significant step towards increasing transparency in corporate ownership, and it is likely to have a positive impact on the fight against financial crimes, there is no doubt it adds another regulatory requirement on the entrepreneur’s plate.
As entrepreneurs navigate the ever-changing landscape of regulations, understanding and adhering to new compliance requirements can become a complex task. The additional administrative load might seem overwhelming, especially when you’re already managing the many aspects of running a business. That’s where support systems like Swyft Filings come into play.
We’re dedicated to helping business owners stay compliant without the added stress. Check our site as we roll out our Corporate Transparency Act services, designed to let you focus on what you do best — growing your business. Leave the paperwork to us.
Bibliography
1. Financial Crimes Enforcement Network. “FinCEN.gov/.” Accessed August 16, 2023.
2. Federal Register. “Beneficial Ownership Information Reporting Requirements.” Accessed August 16, 2023.
3. Financial Crimes Enforcement Network. “Filing Information.” Accessed August 16, 2023.
Frequently Asked Questions
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However, if you signed up for the Swyft Filings Registered Agent Service, you will be charged its initial fee three days after you place your order. From then on, you will be charged according to the terms of your subscription until you change your registered agent with the state or dissolve your company. If you change your agent or dissolve your company on your own, let us know so we can discontinue billing.
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