Prepare to file CTA Beneficial Ownership Information Report

In today’s ever-evolving business environment, staying updated with regulatory changes is crucial. One significant update that has been making headlines is the enforcement of the Corporate Transparency Act (CTA), which commenced on January 1, 2024. 

This legislation requires most smaller corporations, limited liability companies (LLCs), and other entities to report their beneficial ownership information to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). 

The primary goal of this initiative is to enhance transparency and aid law enforcement in their efforts to combat financial crimes such as money laundering.

The Basics of the Corporate Transparency (CTA) Act

The CTA was enacted to combat illegal activities such as money laundering by enhancing the transparency of business ownership.

The CTA mandates that entities disclose the identities of the individuals who own, control, and derive significant benefits from companies. Since its inception, the rollout seemed successful, with a significant number of businesses complying ahead of the initial deadlines. 

However, the landscape shifted dramatically with recent legal challenges, casting some uncertainty over the future of the CTA’s enforcement.

Legal Challenges and Developments

In a notable development in March 2024, a federal district court in Alabama found the CTA unconstitutional, arguing that Congress lacked the constitutional authority to enforce such broad reporting requirements. 

It’s crucial to recognize that this ruling affects only the specific plaintiffs involved in the case and does not universally apply to all businesses across the United States. 

The Department of Justice has not taken this decision lightly and is currently appealing the ruling, indicating that the final resolution may eventually be decided by the U.S. Supreme Court.

State-Specific Actions and Their Implications

As federal proceedings continue, several states, including New York, have begun to implement their own beneficial ownership information reporting requirements. New York’s law specifically targets LLCs formed within the state or those that register to do business there, signaling a growing trend of state-level intervention in corporate transparency matters.

Who Needs to Comply?

If your business entity was formed in California, or any other state, and you haven’t yet reviewed the CTA’s requirements, now is the time. This especially pertains to entities created in 2024, which are required to file their BOI report within 90 days of formation. Entities established before 2024 have different deadlines, but all are subject to the same scrutiny and requirements.

It’s crucial to determine if your business falls under the purview of the CTA. Our team can assist in reviewing your business structure and determining your filing obligations.

Penalties for Non-Compliance

Failing to comply with the CTA can lead to significant repercussions. The adjusted penalties for non-compliance include a civil fine that has been raised to $591 per day for continued violations. More daunting are the criminal penalties, which can reach up to $10,000 and include the possibility of two years of imprisonment for willful neglect or misreporting.

Given the severity of these penalties, it is vital for business owners to ensure full compliance. FinCEN focuses enforcement on willful violations, so businesses that proactively manage their reporting can mitigate the risk of heavy fines and legal challenges.

Why You Should Reach Out to Our Team

Understanding and navigating the complexities of the CTA can be challenging. This is where our expertise comes into play. We provide thorough consultations to review your business’s compliance status and guide you through the reporting process.

Whether your business is newly formed or well-established, our CPA professionals are equipped to handle your BOI reporting needs effectively.

Next Steps for Compliance

If you’re unsure about your filing obligations under the CTA, or if you need assistance with the preparation and submission of your BOI report, we encourage you to reach out to our team today. Proactive management of these obligations not only ensures compliance but also safeguards your business from potential penalties.

Take Action Now: Contact us to schedule a consultation and ensure that your business meets all the requirements of the Corporate Transparency Act. Your diligence today will protect your business’s future and contribute to a transparent, lawful business environment.