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Act Now: CTA Compliance Deadline Approaching for Small Businesses

As we welcome the new year, small businesses in the United States are confronted with a crucial deadline — compliance with the Corporate Transparency Act (CTA). This transformative legislation redefines reporting requirements, necessitating a clear understanding for business owners regarding who needs to report, the penalties for noncompliance, and the intricacies of the reporting process.

It is imperative to note that our firm does not offer CTA compliance services, including Beneficial Ownership Information (BOI) reporting, due to legal complexities.

This article serves as a timely guide, urging immediate action to ensure widespread awareness and prompt adherence to the CTA. We’ve provided below the important information and requirements on the Corporate Transparency Act (“CTA”) and Beneficial Ownership Information (“BOI”) as a guide.

Time to Comply with the Corporate Transparency Act (CTA)

The Corporate Transparency Act (CTA) represents a significant shift in reporting requirements, especially for small businesses in the United States. As a business owner, understanding who needs to report, the penalties for noncompliance, and the specifics of the reporting process is crucial and urgent.

Who Needs to Report?

Small businesses, specifically LLCs, limited partnerships, and corporations with fewer than 20 employees, are likely required to comply with the CTA. It's essential to evaluate your business structure and employee count to determine if you fall under this mandate.

Penalties for Noncompliance

Noncompliance is not a risk worth taking. Businesses failing to adhere to the CTA can face a daily penalty of $500. More severe criminal penalties include fines of up to $10,000 and/or imprisonment.

Defining a Reporting Company

If your business is a corporation, LLC, LLP, or a similar entity registered with the Secretary of State, you need to pay attention. However, trusts and general partnerships are currently exempt.

Who is Exempt?

Your business is exempt if it has more than 20 full-time employees in the U.S., annual gross revenue exceeding $5M, and operates from a physical office within the country.

Information to Report

The CTA requires detailed information about beneficial owners and company applicants. This includes legal names, birth dates, addresses, and identification details, along with your company's legal name, DBAs, tax ID, business address, and formation jurisdiction.

Effective Dates

Mark your calendars: Reporting starts on January 1, 2024. Existing businesses have until January 1, 2025, to comply. For entities formed after January 1, 2024, a 90-day reporting period applies in 2024, followed by a 30-day period for subsequent years.

Updates and Corrections

Accuracy is key. Any changes or inaccuracies must be reported within 30 days of their discovery.

Defining a Beneficial Owner

A beneficial owner is an individual with substantial control or at least a 25% ownership interest in the business, including indirect ownership through contracts or other arrangements.

Our Recommendation

The CTA's complexity and legal implications necessitate professional guidance. We strongly advise consulting with legal counsel to fully understand the CTA’s requirements and ensure your business's compliance.

For detailed BOI reporting requirements, visit the Financial Crimes Enforcement Network (FinCEN) at FinCEN BOI Reporting.

Final Note

This overview is intended to inform, not advise. For legal advice and assistance, contact your attorney.

We urge you to take proactive steps to ensure your business complies with the CTA. The path to compliance is a journey best navigated with the right partners and knowledge.

Take Action Now

The clock is ticking. Secure your business’s future and avoid heavy penalties by complying with the CTA immediately. Compliance isn’t merely a legal formality—it's a critical step to avoid substantial fines and legal repercussions.

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