Commencing on January 1, 2024, a substantial number of small business proprietors will be mandated to submit a novel and highly personal document in compliance with the federal Corporate Transparency Act (CTA). Failure to adhere to this requirement may result in severe civil and criminal consequences, encompassing substantial fines and potential incarceration.
Any enterprise established or registered prior to January 1, 2024, which does not meet the specified exemption criteria, must submit the requisite report by January 1, 2025. Similarly, any enterprise established or initially registered on or after January 1, 2024, and not meeting the exemption criteria, must file the report within 90 calendar days of receiving official or public notification of the effective establishment date. It is imperative to note that FinCEN will only begin accepting Beneficial Ownership Information (BOI) reports starting January 1, 2024.
The BOI report necessitates the disclosure of comprehensive personal details pertaining to the owners of a business, effectively divulging the identities of the company's beneficial owners. The Corporate Transparency Act and Beneficial Ownership Reporting represent integral components of the United States government's endeavors to combat money laundering, terrorist financing, tax fraud, and other illicit activities. The scope of this requirement is extensive, and it may not always be readily apparent which entities are obligated to comply. For small business owners, the initial step involves determining whether their company is subject to these regulations. There exist 23 categories of exempt entities, with the majority applying to entities already subject to substantial federal or state regulation, thereby necessitating the disclosure of their beneficial ownership information to the government. Additionally, an exemption is extended to entities classified as "large operating companies," which fulfill the following criteria: 1) employ more than 20 full-time workers in the United States, 2) maintain a physical office within the United States, and 3) have filed a federal tax return for the preceding year, reporting gross receipts or sales exceeding $5 million.
FinCEN states that while an individual may file a report on behalf of a reporting company, the reporting company is ultimately responsible for the filing. The same is true of the certification. The reporting company will be required to make the certification, and any individual who files the report as an agent of the reporting company will certify on the reporting company's behalf.
The rules and regulations pertaining to the CTA are evolving and complex. The attorneys at Outside Legal Counsel LLP can help businesses comply with the law. Please reach out to us for more information about our services and how we can help.
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