CTA Compliance
What is the Corporate Transparency Act (CTA)?
Entered into law in 2021, the Corporate Transparency Act is bipartisan legislation designed to root out bad actors using US entities to hide illicit activities. The law requires millions of US business entities to file beneficial ownership information with the Financial Crimes Enforcement Network in an attempt to reduce money laundering, terrorism, and other illicit activities from happening covertly via the use of US domestic legal entities. Existing companies have until December 31st, 2024 to file their information; companies formed in the calendar year 2024 will have 90 days from formation.
Companies failing to comply with the CTA may face penalties including: (a) Civil penalty not more than $500 per day, (b) Fine of $10,000, and not more than 2 years in jail, or both, and (c) charges of unlawful failure to report, unlawful failure to provide updates, or a fraudulent report.
How Can We Help?
As your trusted business partner, EZ Tax Services is prepared to help you navigate this new federal requirement. We have attended webinars and conferences with FinCEN representatives so that we can best guide our clients on how to move forward.
We are ready to help you with this important new filing. Let us take this task off your plate and sign up for our CTA Filing Service. Our pricing starts at $99/filing and is based on the complexity of the filing. Once we collect the required information from you your filing will be completed and recorded within 48 hours.
Further details can be found below:
The Corporate Transparency Act (CTA) was a pivotal piece of legislation enacted by the United States Congress in 2021, aimed at increasing corporate transparency and combating illicit activities such as money laundering, tax evasion, and terrorism financing. By requiring businesses to disclose key information about their beneficial owners, the CTA seeks to create a more transparent business environment. Understanding the significance of this act, adhering to its compliance requirements, and being aware of the penalties for non-compliance are essential for businesses of all sizes.
The Importance of the Corporate Transparency Act
The primary goal of the Corporate Transparency Act is to enhance the transparency of corporate structures and prevent the misuse of legal entities for illegal activities. Here are a few key reasons why compliance with the CTA is crucial:
Combating Financial Crimes: The CTA helps authorities trace illicit financial flows by requiring businesses to report their beneficial owners. This makes it harder for criminals to hide behind anonymous shell companies.
Promoting Fair Business Practices: Transparent corporate ownership levels the playing field for all businesses. It ensures that companies cannot gain unfair competitive advantages through secretive and potentially illegal practices.
Strengthening National Security: By curbing the financing of terrorism and other national security threats, the CTA plays a vital role in maintaining the safety and security of the nation.
Building Trust with Stakeholders: Transparency in ownership can enhance the reputation of a business, fostering trust with investors, customers, and partners. This can lead to increased business opportunities and long-term success.
Compliance Requirements and Deadlines
To comply with the Corporate Transparency Act, businesses must report specific information about their beneficial owners. Beneficial owners are defined as individuals who, directly or indirectly, own or control at least 25% of the company or exercise substantial control over it. The required information includes:
The deadline for existing entities to comply with the CTA is January 1, 2025. Entities formed or registered after January 1, 2024, must comply within 30 days of their formation or registration. It is crucial for businesses to start preparing well in advance to ensure they meet these deadlines and avoid potential penalties.
Penalties for Non-Compliance
Failure to comply with the Corporate Transparency Act can result in severe penalties, underscoring the importance of timely and accurate reporting. The penalties for non-compliance include:
Civil Penalties: Businesses that fail to comply with the reporting requirements can face civil penalties of up to $500 per day for each day the violation continues.
Criminal Penalties: Willful failure to report beneficial ownership information, or knowingly submitting false or fraudulent information, can result in criminal penalties, including fines of up to $10,000 and imprisonment for up to two years.
These stringent penalties highlight the seriousness with which the government views corporate transparency and the reporting of beneficial ownership information.
In Conclusion
The Corporate Transparency Act represents a significant step forward in promoting transparency and accountability within the corporate sector. By understanding its importance, complying with its requirements, and adhering to the deadlines, businesses can avoid hefty penalties and contribute to a more transparent and secure business environment. Early preparation and diligent reporting are key to ensuring compliance and reaping the benefits of a transparent corporate structure. Please allow us to assist you in bringing your entity into full compliance before the December 31, 2024 deadline.