By: Andrew Miller

As we’re settling into the new year, the confetti has fallen, the fireworks have been set-off, we finally stop mistakenly using the wrong date, and we start thinking about the new business regulations that have become effective for the year. If you’re like us, you’ve seen a lot about the Corporate Transparency Act of 2020, or CTA, in other articles or blog posts. The CTA has been enacted by Congress and went into effect on January 1, 2024. Now that the new year dust has settled, let’s talk about what you, as a business owner, are now required to do.

What is the CTA, and does it apply to me?

If you’re asking yourself, “What is the CTA?” – you are not alone and if you are wondering, “does the CTA even apply to my practice?” – well the answer is most likely, ‘yes’. The Corporate Transparency Act states that all beneficial owners of the business shall disclose their interest in said business to the Financial Crimes Enforcement Network or “FinCen”. The reason for this is to increase business ownership transparency and to disallow unethical activity such as money laundering and tax fraud. If money laundering or tax fraud was on your list for “more in 2024”, well, we suggest you find a different hobby.

Businesses that are required to report are those designated as LLCs, corporations, or any similar entity created by the filing of a document with a secretary of state, which is most of our readers.

Are you sure I have to report?

There are 23 categories of exemptions, including publicly traded companies, banks and credit unions, tax exempt entities, among others. These companies tend to be heavily regulated by other agencies and, therefore have been reporting this same information for years now.

If you’re not a bank, there’s still hope. A Large Operating Company is also exempt from filing.

By definition, a Large Operating Company is a company that meets all the following criteria:

• Employs more than 20 people in the US
• Have reported more than $5,000,000 in gross revenue (sales) on the prior year’s tax return
• Be physically present in the US.

What exactly am I reporting?

If you find yourself in the “must report” camp, what you’re actually reporting is the company and beneficial owner’s information to FinCEN. A beneficial owner is any individual who directly or indirectly exercises substantial control over a reporting company or owns or controls at least 25% of the ownership interests of a reporting company. Information required to be reported includes:

• Company Information: Full Legal Company Name, Trade Names or d/b/a, State of Formation, Tax ID or EIN.
• Beneficial Owner Information: Full Legal Name, DOB, Current Address, Unique ID such as Passport, DL, State or Local Issued ID.

When’s the deadline?

The reporting deadline depends on when your entity was formed:

• Created before December 31, 2023: Reports are due by December 31, 2024 – can be submitted as soon as January 1, 2024
• Created between December 31, 2023 and January 1, 2025 – Reports are due within 90 days of entity formation – must report Company Applicant Information as well.
• Created After January 1, 2025 – Reports are due within 30 days of entity formation – must report Company Applicant Information as well.

*Company Applicant is the individual responsible for directing or controlling the entity filing with the state.

The initial report can be filed through FinCENs secure web portal at www.fincen.gov/boi. Congress has made it known that willful failure to report can result in fines and/or penalties. *scratches “willful failure to report” from “more in 2024 list”

In all reality, business owners can likely file this report online, themselves, for free at the link above. You might wish to talk to your CPA or attorney about filing for you, but please be on the lookout for fraudsters who will be offering to file for you (in exchange for all your confidential information).

For more information about getting clear on the financial performance of your practice (a great hobby to add to the “more in 2024” list!), request an appointment with one of our financial experts.

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