Corporate Transparency Act: Big Requirements for Smaller Businesses
New regulations have gone into effect for 2024 and will impact nearly all small business owners. Congress passed a law called the Corporate Transparency Act because the federal government wants to know the identities of people who own, control, and run companies operating in the United States. This new law requires businesses to report certain information about the company and the individuals who own or run the business to a regulator known as the Financial Crimes Enforcement Network, or FinCEN.
Are Small Businesses Exempt? Generally no, the Corporate Transparency Act does not have any broad exceptions for smaller companies, but instead actually targets such entities for reporting. The limited exemptions in the law are for large companies and highly regulated industries, particularly those which have existing ownership reporting obligations to the federal government such as the Securities and Exchange Commission.
When Do Businesses Need to Report? The deadline differs for new businesses versus those already in existence. Starting yesterday, January 1, 2024, newly formed companies will have to report the identity information of both owners and key managers/executives to FinCEN shortly after being created (for those entities formed during calendar year 2024, 90 days from formation; for those entities formed January 1, 2025 on, 30 days from formation). Most existing companies must report owners’ and key managers/executives’ identity information to FinCEN by January 1, 2025. This means existing companies that are not eligible for an exemption will need to develop a plan to gather the necessary ownership information this year.
What Are the Penalties for Not Complying? Every company is responsible for its own reporting obligations. Individuals who own or run companies can be held liable for a company’s failure to make a required report to FinCEN. Fines for failing to make a filing when required start at $500 per day, and there are additional civil and criminal penalties possible for reporting inaccurate or incomplete ownership information.
Honigman’s Corporate Transparency Act regulatory specialists can help you understand your compliance obligations and determine whether or not your company needs to file.