Be Prepared for the Corporate Transparency Act

 

Agency owners need to be aware of big changes coming in 2024 under a new law called the Corporate Transparency Act (CTA). This act will require most domestic companies, including LLCs, corporations, and partnerships, to report their “beneficial ownership” information (BOI) to the Financial Crimes Enforcement Network (FinCEN).

What is “beneficial ownership”? It refers to the people who ultimately own or control a company, even if indirectly. For example, a husband and wife who own an LLC would both be considered beneficial owners. The chief operating officer of a corporation may also qualify as a beneficial owner if they exercise substantial control over the company.

The CTA kicked in on January 1, 2024. Companies formed before that date will need to file their first CTA report by January 1, 2025. However, I recommend waiting until Q4 2024 to file for many strategic reasons. This avoids multiple amendment filings as licenses and other ownership details change over the course of 2024.

Companies formed after January 1, 2024, will have 90 days to submit their initial CTA report. After the initial filing, any changes to ownership or beneficial owner details must be reported within 30 days.

Filing late comes with stiff penalties — up to $500 per day up to a $10,000 maximum. So it will be crucial for agencies to stay on top of their CTA compliance.

To find out if you meet the filing requirements for beneficial ownership under the CTA legislation, we must first ask these 3 questions:

• What is a reporting company? Ie: LLCs, corporations, tribal organizations
• Who are beneficial owners? Ie: a COO, spouses of business owners
• Who are the company applicants? (applicable for entities formed after January 1, 2024)

Once we begin to define each layer of the Corporate Transparency Act and answer those questions, we can determine who needs to file, and who qualifies for the 23 possible exemption reasons. For example, if you have more than 20 full-time employees, you might be classified as a large operating company and therefore exempt under the new legislation.

If your company meets these criteria or any of the other 22 exemption reasons, you do not need to worry about CTA reporting.

All agency owners should be aware of this major new law that will require reporting beneficial ownership to the FinCEN beginning in 2024 to avoid penalties. Tune in to the latest episode of the Progressive Agency Podcast to learn more about what agencies need to know right now about the new CTA legislation.