Understanding the Corporate Transparency Act - What You Need To Know - Update as of 1.1.2025
Understanding the Corporate Transparency Act: What You Need to Know
For families with small businesses integrated into their estate plans, the Corporate Transparency Act (CTA) represents an important development. Compliance with this law is crucial not only to meet legal obligations but also to ensure that the businesses you pass on to the next generation remain secure and well-prepared for future regulatory requirements. By understanding how the CTA impacts small business owners, families can better safeguard their assets and preserve their legacies.
The CTA has introduced new reporting requirements aimed at combating money laundering, terrorism financing, and other illicit activities by increasing transparency around the ownership of business entities. For small business owners and those considering forming a company, it’s essential to understand how this law might affect you and your filing obligations.
Who Is Affected by the CTA?
The CTA applies to many types of business entities, including corporations, limited liability companies (LLCs), and other similar entities created or registered in the United States. Specifically, the reporting requirements affect companies that meet the following criteria:
Small and Medium-Sized Businesses: Most businesses with 20 or fewer employees, less than $5 million in annual revenue, and that do not operate from a physical office within the United States will need to file a report.
Newly Formed Entities: Any entity formed or registered after January 1, 2024, is automatically subject to the reporting requirements.
Existing Entities: Companies formed before January 1, 2024, must also comply but have a longer timeframe to file their initial reports.
Certain entities, such as publicly traded companies, banks, and tax-exempt organizations, are exempt from these requirements.
What Information Must Be Reported?
The CTA requires reporting companies to provide identifying information about their beneficial owners and applicants who file for the entity’s formation. This includes:
Full legal name
Date of birth
Current residential or business address
A unique identifying number from an acceptable document (e.g., passport, driver’s license, or similar government-issued ID)
What’s The Risk Of Not Filing?
· Non-compliance with the CTA can lead to severe penalties, including fines of up to $500 per day the report is late, and criminal penalties may also apply for willful violations.
Filing Deadlines
For Existing Entities: While the initial reporting deadline was anticipated for January 1, 2025, a recent Fifth Circuit ruling on December 26, 2024, has made compliance voluntary for now, leaving the timeline uncertain as of time of this writing. Some companies are voluntarily filing to avoid future surprises and make sure they aren’t left scrambling to avoid penalties, while others adopt a "wait and see" approach pending litigation outcomes.
For Newly Formed Entities: Businesses created or registered on or after January 1, 2024, must file their reports within 30 days of their formation or registration.
Updates to Reports: If there are changes to the reported information, updates must be filed within 30 days of the change.
How to File:
Beware of companies offering registration service that you don’t need. Filing your BOI (Beneficial Ownership Interest) report is easy and free through the official Financial Crimes Enforcement network on-line filing system.
To start filing your company’s report, simply follow the instructions found on the website at boiefiling.fincen.gov
How We Can Help
Navigating the requirements of the Corporate Transparency Act can be complex, but Peachtree Estate Planning is here to help guide you every step of the way. Whether you’re forming a new entity or ensuring compliance for your existing business, we can help you stay on top of your obligations and avoid costly penalties and make sure that your business interests are protected as part of your overall estate plan.
