Blog Post

Corporate Transparency Act imposes new reporting requirements on small businesses

Phil Rupprecht • Jan 02, 2024

Welcome to 2024 and the Corporate Transparency Act (CTA) – a new federal law that requires most small businesses to file a new report with the Treasury Department.

The CTA is intended to aid law enforcement by reducing the use of front companies with anonymous ownership. It requires many companies to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. “Beneficial owners” are individuals who directly or indirectly own or control a significant portion of a reporting company.

If your business is a limited liability company (LLC), limited partnership, or corporation, and unless it qualifies for one of the exemptions, you must file an initial report by the end of 2024. If you start a new business in 2024, you must file the report within 90 days of formation.

A few things you should know about the Act:

Who Must Report? The reporting requirements generally apply to most closely held corporations, LLCs, and similar entities. Banks, securities firms, publicly traded companies, and certain other entities are exempt.
What Must be Reported? You must disclose to FinCEN private information about your company’s beneficial owners, including full legal names, residential addresses, dates of birth, and identification numbers.
What Are the Consequences of Non-compliance? Non-compliance can result in penalties, fines, and even criminal charges. It is crucial that reporting companies understand and adhere to the reporting requirements.
Is Reported Information Public? While the CTA aims to enhance transparency, it also attempts to preserve some individual privacy. Reported information is not publicly accessible but will be available to law enforcement and certain government agencies, including taxing authorities, for investigative purposes.

FinCEN is still updating its guidance and regulations. The FinCEN web portal first opened to the public on January 1, 2024.

Like many other firms, Frazer Ryan is simultaneously tracking these changes and developing our process for reporting and compliance.

We are ready to help clients who are forming new entities to comply with the CTA, but we are still considering best practices for reporting the beneficial owner information of companies formed before January 1, 2024. Fortunately, those companies have until December 31, 2024 to file their initial report.

We anticipate FinCEN will refine its guidance and answer more questions about existing company reporting in the coming weeks and months. When the dust settles (and it should soon), we will send another email with final guidance and perhaps some suggestions of our own. At that time, we will be ready, willing, and able to answer your compliance questions and assist in filing your initial reports. Stay tuned.

FinCEN Resources

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