Business Requirements Under the Corporate Transparency Act

Business Requirements Under the Corporate Transparency Act

Authors:
Luis Alicea, Director of Community Association Banking
Kris Karnes, Senior Director, Business Owner Advisory Services
Laura Troshynski, Senior Director, Business Owner Advisory Services

As of Jan. 1, 2024, the Corporate Transparency Act (CTA) requires many businesses to disclose Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN), unless the business qualifies for an exemption.

For impacted businesses formed or registered to do business in the U.S. prior to Jan. 1, 2024 (including some businesses that are now inactive), the deadline for providing BOI is Jan. 1, 2025. For impacted entities formed or registered after Jan. 1, 2024, the deadline for providing BOI relates to the date the entity was formed or registered. 

There are significant civil and criminal penalties for noncompliance with the CTA. 

We recommend that all our business customers contact their attorney or accountant to determine any reporting obligations under the CTA and to obtain assistance with fulfilling those obligations in a timely manner.

Corporate Transparency Act Explained

At its core, the Corporate Transparency Act seeks to pierce the veil that hides corporate ownership. Under the Act, organizations must provide details of any beneficial owner who has a significant controlling interest – defined as one who owns or controls at least 25% of the ownership interests or who exercises substantial control over the company.

Required information includes, but may not be limited to, full legal name, date of birth, address, a unique identification number for each beneficiary—such as U.S. driver’s license or passport—and a photo of the document with the individual’s identification number. The disclosures are intended to prevent illegal activities by revealing the people who actually benefit from the company's operations.

Strong incentives to comply with the Corporate Transparency Act come in the form of fines of hundreds of dollars per day for each violation and severe penalties of up to two years in prison for failure to report. With such dire consequences, corporations must prioritize timely and accurate beneficial ownership disclosure. Even an innocent reporting error can lead to costly consequences.

By understanding and fulfilling the obligations under the Corporate Transparency Act with the assistance of an attorney or accountant, businesses can adapt to this new era of heightened oversight.

The information in this article does not constitute legal advice, and the authors recommend consulting with an attorney to discuss your specific situation.

About the Authors

Luis collaborates with community, homeowners and condominium associations, as well as community association management companies, to support capital and funding needs.

Laura brings her experience working with business owners, and as a former member of a family business, to the Business Owner Advisory Services team.

Kris employs her experience as former legal counsel, combined with a dedication to client success, to offer advisory services to owners considering a business transition or sale.