Understanding the Corporate Transparency Act 2024: What is it and Why Does it Matter?
On March 1, 2024, the Corporate Transparency Act 2024 (CTA) was declared unconstitutional by a federal district court. However, this decision only impacts members of the National Small Business Association (NSBA). For most business owners, compliance with the Corporate Transparency Act 2024 is still required.
What is the Corporate Transparency Act 2024?
The Corporate Transparency Act 2024 requires U.S. businesses to file Beneficial Ownership Information (BOI) Reports with the Financial Crimes Enforcement Network (FinCEN) unless they meet specific corporate transparency act 2024 exemptions. Understanding whether your business is exempt is crucial to avoid unnecessary penalties.
Who Needs to Comply?
Pursuant to the CTA, US businesses are required to file their initial Beneficial Ownership Information (BOI) Reports with the Financial Crimes Enforcement Network (FinCEN), unless you are an exempt entity.
The entities that are absolutely required to comply are those not failing within the above-mentioned exemptions and are:
- Business entities created by the filing of a document with a Secretary of State or similar office under the law of a State or Indian Tribe, not falling within the exemptions; or
- Business entities formed under the law of a foreign country and registered to do business in the United States by the filing of a document with a Secretary of State or a similar office under the laws of a State or Indian Tribe, not falling within the exemptions.
Corporate Transparency Act 2024: How to File
To comply with the Corporate Transparency Act: how to file your BOI Report with FinCEN, you need to understand the specific timelines based on your business formation date:
- Entities formed before January 1, 2024: File your BOI Report by January 1, 2025.
- Entities formed in 2024: Submit your BOI Report within 90 days of business registration.
- Entities formed in 2025 and beyond: You have only 30 days to file your BOI Report from the date of registration.
You should comply to avoid a potential $500/day fine and/or two years of incarceration.
If you own a business, you need to file a BOI Report with FinCEN, otherwise, you can be liable to pay a Civil Penalty of up to Five Hundred US dollars ($500) for each day that the violation continues or has not been remedied, up to a maximum penalty of Ten Thousand US dollars ($10,000), imprisonment for two (2) years, or both fine and imprisonment! Yes, you may pay the fine and spend two (2) years in jail.
The penalties for non-compliance are harsh, but again, it is the law, and while it is undeniably a hassle, unless and until the unconstitutionality ruling is made applicable to everyone, all business owners must comply.
And you must comply fast! There’s a deadline.
For business entities formed or registered before January 1, 2024, the deadline for the submission of the initial BOI Reports to FinCEN must be done on or before January 1, 2025.
If you formed or registered your business during 2024, you must submit your initial BOI Report within ninety (90) days from the official registration of your business.
If you plan to form or register a business next year, 2025, then you must prepare now because you will only have thirty (30) days to submit your initial BOI Report from the time of your business’ registration.
We at The Oracle Legal Group can help you comply with the CTA so that proper submission of your BOI Report is ensured and you can avoid paying hefty fines or possibly spending jail time for non-compliance. We will even advise you on how exactly will this law impact your business and what you can do about it.
Why do we have to do this extra paperwork anyway?
Well, apart from the steep fines and penalties for non-compliance, the US Congress passed this law to crack down bad businesses that use corporate entities to launder money or further crimes. So, if you are a good business, there’s nothing to hide. We always encourage our clients to be good corporate citizens because good businesses are compliant with laws and regulations. It’s a hassle, but it is what it is and we can help ease your burden when it comes to legal work such as this.
Will the information I submit be available to the public?
Of course not. The purpose of the law is not to violate your privacy, it’s to help FinCEN do its job and support laws related to Anti Money Laundering, Anti Terrorist Financing, and other Financial Crimes. The general goal of the law is to make America a safer place to do business and, of course, to live in.
Your information will only be available to relevant government agencies for this purpose, Such authorized entities include FinCEN, State Law Enforcement Agencies, US Treasury Department, Foreign Requesters (provided that they comply with strict requirements and criteria), Financial Institutions, and other Federal Functional Regulators and Regulatory Agencies (both subject to customer due diligence requirements). These entities authorized to have access to the information you submit are subjected to high security and confidentiality protocols. So really, if you mean good business, there’s really nothing to worry about. If your business is formed as an Anonymous LLC, your confidentiality will still be protected.
Is there a fee for filing my BOI Report with FinCEN?
No, you won’t have to pay for anything to FinCEN. It’s additional but very important work to be done that we can help you with, however, there will be no additional costs or fees for filing. In fact, FinCEN encourages those reporting companies that need help meeting their reporting obligations to consult with professional service providers such as lawyers, accountants, or enrolled agents.
Rest assured that The Oracle Legal Group is more than qualified to assist you with these reportorial obligations. Lawyers, such as us, are bound to our clients under the Attorney-Client privilege. We are legally obliged to keep confidential whatever matters pertaining to you or your business that you may need to disclose. Other professionals may not have the same legal obligation to maintain strict confidentiality.
I already filed a BOI Report, can we still change or update it?
Yes, you may and we can help you with that. In fact, the law mandates that a reporting company must update its BOI Report within thirty (30) days from the time that the change occurred. If you obtained a FinCEN ID, then that would make the process easier. However, businesses are not required to get a FinCEN ID. We can still help, either way.
Can your attorney file the BOI Report on behalf of your business?
Yes, according to FinCEN, your attorney can assist you file your BOI Reports for you. Seeking your attorney’s assistance would ensure that your BOI Report is properly filed and that you receive the proper legal advice on how this law impact you and your business.
If you have multiple businesses, or if there are multiple beneficial owners or company applicants, we can still file it all in one report and in one transaction only.
Exempt entities are:
- Issuer of class of securities registered under Sec. 12 of the Securities Exchange Act of 1934;
- Issuer that is required to file supplementary and periodic information under Sec. 15(d) of the Securities Exchange Act of 1934;
- Entities that exercise governmental authority on behalf of the United States, or any such Indian Tribe, State, or political subdivision;
- Banks as defined in Sec. 3 of the Federal Deposit Insurance Act, Sec. 2(a) of the Investment Company Act of 1940, or Sec. 202(a) of the Investment Advisers Act of 1940;
- Federal Credit Unions and State Credit Unions as defined in Sec. 101 of the Federal Credit Union Act;
- Bank Holding Companies as defined in Sec. 2 of the Bank Holding Company Act of 1956;
- Savings and Loan Holding Companies as defined in Sec. 10(a) of the Home Owners’ Loan Act;
- Money Transmitting Businesses registered with the Secretary of the Treasury under Section 5330;
- Brokers or Dealers as defined in Sec. 3 of the Securities Exchange Act of 1934 and registered under Sec. 15 of the same Act;
- Exchange or Clearing Agencies as defined in Sec. 3 of the Securities Exchange Act of 1934 that is registered under Sec. 6 or 17A of the same Act;
- Entities registered with the Securities and Exchange Commission or the Investment Advisers Act of 1940 that are Investment Companies or Investment Advisers, or that which filed Item 10, Schedule A and B of Part IV of Form ADV, or any successor thereto, with the Securities and Exchange Commission;
- Insurance Companies as defined in Sec. 2 of the Investment Company Act of 1940 which is subject to the supervision of the Insurance Commissioner or a similar official or agency of the State and with operating presence at a physical office within the US;
- Registered entities of the Commodity Exchange Act as defined in Sec. 1A therein;
- Public Accounting Firms registered in accordance with Sec. 102 of the Sarbanes-Oxley Act of 2002;
- Public Utilities that provide Telco, Electrical Power, Natural Gas, or Water and Sewer services within the US;
- Financial Market Utilities designated by the Financial Stability Oversight Council under Sec. 804 of the Payment, Clearing, and Settlement Supervision Act of 2010;
- Political Organizations;
- Trusts;
- Corporations, Limited Liability Companies, or similar entities that operate exclusively to provide financial assistance to, or hold governance rights over US person/s, or derives at least a majority of its funding from one(1) or more US persons/s demonstrating more than Five Million US dollars ($5,000,000.00) in gross receipts or aggregate sales, and operating in the US with physical office therein;
- Entities that are no longer engaged in active business; and
- Other entities exempt by laws.
While this list may already seem long, it’s not the whole list as we only listed the most common ones. To be sure whether you or your business is exempt, give us a call or message us so that you can know for sure.
For more information on the Corporate Transparency Act of 2024, assistance in filing BOI Reports, or personalized legal advice on how it will impact your business, talk to us. We have been helping business owners navigate the law by providing expert support so you can have peace of mind and focus on more important things— like growing your business.
