The Corporate Transparency Act and Its Impact on LLCs
The Corporate Transparency Act and Its Impact on LLCs
Limited Liability Corporations (LLCs) have become increasingly popular across the United States as a tool for protecting an owner’s personal assets from lawsuit liability. Additionally, LLCs are relatively simple and affordable to establish and maintain. However, it is crucial to note that the federal government has enacted a regulation that impacts LLCs and their owners. Failure to comply with this regulation could result in large fines or even jail time.
What is the Corporate Transparency Act?
The Corporate Transparency Act (CTA), which came into effect in 2021, has a considerable impact on Limited Liability Companies (LLCs). It mandates that LLCs disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). The objective of the CTA is to increase transparency within corporate structures and fight against money laundering, terrorism financing, and other illicit activities.
What Has the Corporate Transparency Act Changed?
Due to the CTA, LLCs are now required to disclose the identities of their beneficial owners. These are the individuals who directly or indirectly own 25% or more of the entity, along with any individuals who have substantial control over the company.
LLCs established before January 1, 2024, will need to file their beneficial ownership information report before January 1, 2025. Any LLCs established between January 1, 2024, and December 31, 2024, must file their report within 90 days of formation. LLCs established on or after January 1, 2025, must file their beneficial ownership information report within 30 days of formation. Any change of ownership during the existence of the LLC must be filed within 30 days of the change.
In the Beneficial Ownership Information report, LLCs formed on or after January 1, 2024, must disclose information about themselves, their beneficial owners, and their company applicants. However, LLCs formed before January 1, 2024, will only need to report information about themselves and their beneficial owners.
What Happens if You Don’t Comply With the CTA?
Failure to comply with the CTA’s filing requirements can result in significant penalties. Civil penalties for non-compliance range up to $500 per day, and criminal penalties can lead to fines of up to $10,000 and/or imprisonment for up to two years.
How Do You File Your Report in Compliance with the CTA?
To file your report, visit the Beneficial Ownership Information page on the Financial Crimes Enforcement Network’s website. If you want to know more information about the filing process, Corporate Transparency Act Exemptions, or any other questions, please check out the Beneficial Ownership Information FAQ page.
