The Corporate Transparency Act Conundrum
So far two million small business owners have woken up to the new federal reporting requirements in 2024 under the Corporate Transparency Act (CTA). That may seem like a large number, but it is only 5% of the 36 million businesses needing to file before the end of 2024. Tens of millions of business owners and managers need to snap awake. Each is at risk of $10,000 fines and long prison sentences if they ignore this new reporting requirement, miss the December 31, 2024 deadline, and Treasury files an enforcement action against them.
Entrepreneurs and other business owners generally are afraid of the U.S. Treasury Department and the IRS, but are not familiar with FinCEN, the enforcement arm of Treasury. FinCEN will soon start filing enforcement actions against potentially millions of innocent small business owners. Waiting to file your beneficial ownership after fines accrue is not smart business planning.
This new requirement is real and has not faded away, despite misleading information on the internet. Inaction through ignorance of the law or misunderstandings of the law is no excuse to avoid $10,000 fines and jail time. It is high time every entrepreneur comes out of the fog. Entrepreneurs and even people who set up an LLC that owns a house or does nothing need to file their report without waiting until the last minute.
Many have seen headlines that a federal court declared the law unconstitutional and asserting that the Beneficial Ownership Information Report (BOIR) requirements are no longer valid against the plaintiffs in the case. However, these claims are misleading. The fines and jail time for not complying with the Corporate Transparency Act are similar to those of bringing a gun to the airport, to put this in perspective.
Reporting Requirements Under the CTA
The Corporate Transparency Act (CTA) requires American companies to report beneficial ownership information including control parties to the U.S. federal government. Specifically, the CTA mandates that U.S. business entities disclose details about their natural human beneficial owners with at least a 25% interest or anyone including non-owners with substantial control to the Financial Crimes Enforcement Network (FinCEN) by filing a Beneficial Ownership Information Report (BOIR).
FinCEN has set strict deadlines for these BOI Reports. New entities formed in 2024 must file reports within 90 calendar days of the company’s official formation date. Meanwhile, companies that were already in existence before 2024 must file their reports before January 1, 2025. Read More..