As a small business owner, staying informed about changes in federal legislation is crucial to ensuring your company remains compliant and avoids potential legal pitfalls. At Omni Law P.C., our experienced corporate litigation attorneys, serving clients in New York and California, are closely monitoring the implementation of the Corporate Transparency Act (CTA), which is set to take effect on January 1, 2024. This new federal law will significantly impact millions of small business owners and companies by mandating greater transparency in the information reported to the federal government.
What is the Corporate Transparency Act?
The Corporate Transparency Act, passed as part of the National Defense Authorization Act for Fiscal Year 2021, aims to combat money laundering, terrorist financing, and other illicit activities by mandating that select corporate entities disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. The CTA is designed to close loopholes that allow criminals to exploit the opacity of business ownership structures to hide their illegal activities.
Who is Affected by the CTA?
The CTA applies to a wide range of business entities, including:
- Corporations
- Limited Liability Companies (LLCs)
- Limited Liability Partnerships (LLPs)
- Other domestic or foreign entities that file documents with the secretary of state
There are some exemptions for certain types of entities, such as publicly traded companies, banks, credit unions, and insurance companies, among others. However, the vast majority of small businesses will be subject to the new reporting requirements.
What Information Must Be Reported?
Under the CTA, affected business entities will be required to disclose information about their beneficial owners to FinCEN – a person who (whether indirectly or directly):
- Owns 25% or more of the equity interests of the entity; or
- Exercises substantial control over the entity
What must be reported for each beneficial owner:
- Full legal name
- Date of birth
- Current residential or business street address
- Unique identifying number from an acceptable identification document (e.g., driver’s license or passport)
Entities will also be required to report any changes in beneficial ownership within 30 days of the change.
Penalties for Non-Compliance
Failure to comply with the reporting requirements of the CTA can result in severe penalties, including:
- Civil penalties of up to $500 per day until the violation is corrected
- Criminal fines of up to $10,000 and/or imprisonment for up to two years for willful violations
Given the potential consequences of non-compliance, it is essential for small business owners to take steps now to ensure they are prepared to meet the new reporting requirements when the CTA takes effect.
How Omni Law P.C. Can Help
At Omni Law P.C., our knowledgeable corporate litigation attorneys are well-versed in the complexities of the Corporate Transparency Act and are ready to assist small business owners in navigating this new legal landscape. We can help you:
- Determine whether your business entity is subject to the CTA’s reporting requirements
- Identify your company’s beneficial owners and gather the necessary information for reporting
- Develop internal processes and procedures to ensure ongoing compliance with the CTA
- Represent your interests in the event of an investigation or enforcement action related to the CTA
If you want to know more or want assistance determining your business is following the necessary requirements, call Omni Law P.C. today. You can call 646-736-4184 for our New York attorneys and (323) 300-4184 to reach out to California business lawyers.
We can help you ensure your business is prepared for the new reporting requirements. We serve our clients in New York and California and are dedicated to providing comprehensive guidance and support to protect our clients’ businesses and stay abreast to evolving federal compliance regulations. Contact us today to get talk with our skilled team.
