The Corporate Transparency Act: What You Need to Know

Preston Rosamond |

As a business owner, you keep a good number of balls in the air every day, so it can be tough to keep up with changes in regulations and requirements. One of those new requirements comes from the Corporate Transparency Act—and it’s a requirement you don’t want to overlook.

 

Failing to comply with the requirements of the Corporate Transparency Act that took effect January 1, 2024, could result in daily fines, thousands of dollars in penalties, and even jail time. Here’s a primer on what you need to know about the Corporate Transparency Act and what you can do to see that you comply with its requirements.

What Is the Corporate Transparency Act?

The U.S. Congress passed the Corporate Transparency Act in 2021. Beginning in 2024, the act requires businesses, such as corporations and limited liability companies (LLCs), to register details about beneficial owners with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of Treasury. 

 

This means you must file a Beneficial Ownership Information Report (BOIR) providing specific information on “beneficial owners,” which include people who own 25% of the business or exercise substantial control over the business.  

 

The federal law aims to combat such financial crimes as money laundering, corruption, and tax fraud, as well as other illicit activities like financing terrorism and human and drug trafficking. The goal is to close a loophole that allows people involved in illegal activities to hide their identities behind shell corporations.

 

If you fail to comply with the mandate, you can be fined up to $500 each day the violation continues and face criminal penalties of up to $10,000 and two years in prison.

Which Businesses Does the Corporate Transparency Act Affect?

The law impacts just about every business, including most small businesses incorporated as LLCs. You also need to conform with the law if you formed your business by filing with the Secretary of State’s office or a similar office under the laws of your state.

 

Additionally, the law applies to foreign businesses incorporated in other countries and registered to do business in the U.S.

What Are Businesses Required to Submit?

You are required to submit the full names, residential addresses, birth dates, and identification of any beneficial owners and people with control over decision-making. For businesses formed in 2024, you also must submit information on “company applicants,” or people who filed your formation or incorporation papers.

 

You also must register the following information on the company:

 

  • Legal name
  • Entity type, such as LLC or corporation
  • Formation state
  • Principal business address
  • Federal Tax ID (EIN)
  • All trade and “doing business as” (DBA) names

 

You should include domain and website names as well.

 

Keep these filing deadlines in mind:

 

  • Businesses formed before 2024 must file by January 1, 2025.
  • Businesses formed in 2024 have 90 days after receiving official notice of the formation.
  • Businesses formed in 2025 have 30 days after receiving office notice of the formation.

 

The law exempts 23 other types of businesses, including publicly traded companies, nonprofits, and certain large operating companies.

How You Can Get and Stay Prepared

You only have to register your information once. However, the information must be updated every time there is a change. Here are two proactive measures you can take to help you stay in compliance with the law:

 

  • Develop a system for collecting all the data required for filing.
  • Incorporate regular audits or updates of required data.

 

Having protocols for tracking data and changes can help you keep your business from running afoul of the law.

Get Guidance From a Trusted Financial Advisor

Staying compliant with the Corporate Transparency Act is vital for your business, and one of the best ways to do so is by having a group of professionals on your side. At The Rosamond Financial Group, we strive to be your trusted advisor through every step of the process. 

 

Contacting our fee-based team is your first step to safeguarding your financial future. Call my office at 830-798-9400 or email solutions@rosamondfinancialgroup.com. See what clients are saying about working with us.

About Preston

Preston Rosamond is a financial advisor and the founder of The Rosamond Financial Group Wealth Management, LLC with over two decades of industry experience. He provides comprehensive wealth management and financial services to successful business owners, corporate executives, and affluent retirees who enjoy simplicity and seek a professional to help them pursue their goals. Preston personally serves his clients with an individual touch, a sincere heart, and his servant’s attitude is evident from the moment you meet him. Learn more about Preston or start the conversation about your finances with him by emailing solutions@rosamondfinancialgroup.com or schedule a call on his online calendar.