Navigating the Corporate Transparency Act: Essential Compliance for Small Business Owners
I’m excited to share an insightful piece from a trusted legal partner, DeAnn Farthing. DeAnn’s a good friend, a fellow Estate Planning Council member, Fishers resident, and partner with Robinson Farthing Spandau Williams, an experienced law firm in Indianapolis. She provided an important update on the Corporate Transparency Act (CTA), a new law that impacts many clients and friends of the firm. For any small business owners, I encourage you to read through the key points and take action if necessary.
By DeAnn Farthing: Corporate Transparency Act
I am writing now to alert you to a new federal law that took effect on January 1, 2024, known as the Corporate Transparency Act (the “Act”). The Act will affect many of your companies and carries significant penalties for non-compliance. The purpose of this post is to make you aware of the Act in its current form, and to give you a brief summary of its substance and implications. There is legislation currently pending that may affect the following, but as it stands this is the current law, particularly in regards to the reporting deadlines.
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Corporate Transparency Act – What is it?
What is the Purpose? The stated purpose of the Act is to combat terrorism, organized crime, and money-laundering.
Who is Required to Report? Corporations, Limited Liability Companies, and other entities required to file with each respective state’s Secretary of State.
What are the Reporting Requirements? Each of the above are required to register and report to the federal government the following: Detailed information about reporting companies, beneficial owners, and company applicants. For Reporting Companies, full names, street addresses, states of organization, and Federal I.D. Numbers are required. For Beneficial Owners and Company Applicants, full names, street addresses, date of birth, and driver’s license or passport number (including a photocopy).
What are the Reporting Deadlines?
- Entities existing as of December 31, 2023: Deadline extended to January 1, 2025.
- Entities formed on or after January 1, 2024: Must report within 90 days of formation.
- Entities formed on or after January 1, 2025: Must report within 30 days of formation.
Who are Beneficial Owners? Individuals with substantial control OR ownership of at least 25% in a reporting company.
Who Is Not Required to Report? Exceptions generally include: non-profits, banks, other regulated businesses, accountants, and companies with over 20 employees AND gross annual receipts exceeding $5 Million AND have a principal office located within the United States. There are 23 unique exceptions listed on the FinCEN website that you can review to see if you fit any.
What are the Penalties? Civil penalties of up to $500 per day per occurrence up to $10,000.00 and potential criminal penalties, including up to two years in jail, for willful disregard of compliance.
What Should You Do?
Review the Small Entity Compliance Guide published by FinCEN: Go to the FinCEN website and review the Small Entity Compliance Guide by visiting https://www.fincen.gov/boi/
Gather Pertinent Information: Ensure you have all necessary information for CTA reporting compliance if you are a Beneficial Owner or responsible for compliance.
Obtain a FinCEN Identifier: Beneficial Owners can obtain a FinCEN Identifier for reporting purposes if they do not want to file their personal information with the Beneficial Owner Report. This is helpful for owners of multiple companies, particularly to be able to update any changes to personal information (i.e., address) across multiple entities.
File Reports with FinCEN: File the appropriate report with FinCEN within the deadlines set forth above. The federal government has set up an online portal system to register called the Beneficial Ownership Secure System (“BOSS”). You can find more information and file by visiting https://boiefiling.fincen.gov/.
Legal Assistance: Seek legal assistance to understand and comply with CTA requirements.
Again, the above is a brief overview of the over 200 page Act that will undoubtedly have changes, amendments, and advisory opinions issued. As always, feel free to reach out to us.
Sincerely,
DeAnn Farthing, Esq.
DeAnn Farthing is a partner at Robinson Farthing Spandau Williams LLC. She is a life-long Indiana resident and highly rated attorney with extensive experience practicing in the areas of estate planning, probate, trust administration, guardianships, corporate formation, and general business litigation and operation.
DeAnn strives to help her clients develop effective solutions and strategies aimed to achieve their legacy goals. Ms. Farthing works to educate individuals in all stages of life on the importance of planning. She daily provides information to interested clients that answer "what if" questions. Her goal is to prepare for and make emotionally charged situations as easy and economical as possible.
Additionally, Ms. Farthing is highly active in her local legal community. She is a member of the Estate Planning Council of Indianapolis, Inc., the Indianapolis Bar Association, and the Indiana State Bar Association. She is a frequent speaker at continuing legal education seminars in Indiana on a variety of legal topics educating other attorneys on how best to advise their clients.