Filed yet? If not, here is what you need to know!
Starting January 1, 2025, all business entities are required to report beneficial ownership information to the Financial Crimes Enforcement Network, a bureau of the U.S. Department of Treasury. The Corporate Transparency Act established the new requirement, which was put in place to combat money laundering and other common fraudulent activities among LLCs. The MRAA is dedicated to keeping you informed and ensuring that you have properly filed in order to avoid hefty fines and potential prison time. Below is a high-level overview of the requirements to help you determine if you are required to file.
Who Must Report?
CTA reporting requirements are fairly comprehensive. If you are a business principal or owner it is more likely than not, you will be required to report. According to the CTA, “Reporting Companies” include both new and existing entities. Exemptions are mainly for large operating companies and for businesses that already disclose beneficial ownership information to the government.
However, an exemption exists for “Large Operating Companies,” which are defined as a business entity for which ALL of the following criteria apply:
- Employs more than 20 full-time employees
- Filed a federal income tax return for the previous year demonstrating more than $5 million in gross receipts or sales.
(Please note, if a business dips below any of the thresholds, at any time, that business will then have to file a report within 30 days of the change.)
What Must I Report?
The CTA is focused gathering “Beneficial Ownership Information” and therefore reporting companies must disclose who: (1) owns a 25% equity stake or (2) exercises substantial control over the entity. Furthermore, an updated report must be filed within 30 calendar days of any change in its beneficial ownership information, including a change in beneficial owners or any change to a beneficial owner’s name, address, or unique identifying number. For example, if a reporting company hires a new CEO or if a beneficial owner obtains a new driver’s license or other identifying document that includes a changed name or address, filing an updated report is required.
In order to simplify this process, the MRAA highly recommends that you create a FinCEN ID, a unique identifying number issued to an individual by FinCEN. An individual beneficial owner or company applicant’s FinCEN ID can be reported instead of required information about that individual on the reporting company’s Beneficial Ownership Information Report submitted to FinCEN. This will make updating the aforementioned information and the entire process easier.
To create a FinCEN ID, simply click here and follow the instructions.
Reporting Deadlines
Since the CTA is focused on obtaining information from both new and pre-existing entities, be aware of the following reporting deadlines:
Penalties and Fines
Noncompliance of the CTA can result in major fines and, potentially, prison time. Failure to comply may result in civil penalties of up to $500 per day, as well as criminal penalties of up to $10,000 in fines and/or imprisonment for up to two years.
How MRAA Can Help
The MRAA is preparing a walkthrough guide for filing reports to assist you in completing this new reporting requirement. The U.S. Treasury Department’s Financial Crimes Enforcement Network offers a comprehensive compliance guide clarifying the CTA’s reporting requirements.
Additionally, the MRAA and the Small Business Legislative Council are working to push Congress to repeal these burdensome reporting requirements, or at the very least, simplify them to make reporting far less burdensome.
For any additional questions about the CTA, please connect with MRAA Government Relations Team of Chad Tokowicz, Government Relations Manager, or Mike Sayre, Director of Government Relations.
