Beginning January 1, 2024, the Corporate Transparency Act (CTA) will require businesses to file an annual report about their owners and major decision-makers. If you plan to create a new company, your reporting deadline under the CTA could be as soon as 30 days after the date of its creation. The good news is there’s a way to get more time to file the required report for your new business, but you have to act fast.
In this blog, I’ll share how to get a year-long reporting extension for your business that can give you more time to gather the required information needed to file the report. But before I tell you how to gain the extension, it’s important to understand what the CTA is and how it will affect your business.
What The Corporate Transparency Act Means For Your Business
The Corporate Transparency Act (CTA) was enacted in 2020 to enhance corporate transparency and prevent money laundering, terrorist financing, and other financial crimes. By requiring businesses to report information about their owners and major decision-makers, the Act seeks to make it easier to identify “shell” corporations – companies that don’t actually perform an active business or trade and which are often used to move money around illegally.
To comply with the Act, certain businesses including some corporations and LLCs will need to disclose the names of anyone who owns 25% or more of the company and any members of the company who have “substantial control” over the company’s activities to the Financial Crimes Enforcement Network (FinCEN).
In order to comply, a business must file an annual report with the following information on each owner or controller of the business:
- Business name and current business address
- State in which the business was formed and its Entity Identification Number (EIN)
- Owner/controller’s name, birth date, and address
- Photocopy of a government-issued photo ID (such as a driver’s license or passport) of every direct or indirect owner or controller of the company
If a company doesn’t file an annual report, it may be penalized with a $500 fine for every day the report is late and its owners could even face imprisonment for up to two years.
What Businesses Need to Report Under The CTA?
The new CTA rule applies to any company that is created by filing a formation document with the Secretary of State or a similar office, such as corporations and limited liability companies (LLCs).
Since money laundering and terrorist financing are usually conducted using small businesses, the Act largely aims to collect information on these companies, so entrepreneurs and small business owners should take extra care to meet the filing requirements.
Publicly traded companies, non-profits, and regulated companies like financial firms, accounting agencies, and banks are exempt from the rule. Large companies are also exempt if they have 20 or more full-time employees in the US and generate $5 million or more in revenue. An LLC or corporation that isn’t actively performing a business or service is also exempt due to its inactivity.
When Do You Need to File Your Report and How Can You Extend Your Deadline?
Here’s the thing about filing your annual report for the Corporate Transparency Act: If your company was created after January 1, 2024, you’ll need to file your report within 30 days of the company’s creation. But, if your company’s formation occurred on or before December 31, 2023, you have until January 1, 2025, to file its CTA report.
So, if you already have a business entity created, you have until January 1, 2025, to submit your report. So, if you’re thinking of creating a new company or changing the entity structure of an existing company, doing so before January 1, 2024, will give you a year-long grace period to file the report. Otherwise, once January 1 rolls around, it’ll be too late to take advantage of this extension.
Why does this extension matter?
The extension provides a valuable window of time for business owners to understand the reporting requirements thoroughly, gather the necessary information, and engage with legal professionals to ensure they’re in compliance with the Act without the pressure of a 30-day deadline.
The Act’s reporting rules seem straightforward, but the penalties for non-compliance can be substantial. Creating your new business entity by year-end provides a cushion against potential penalties and risks associated with overlooking or misunderstanding reporting requirements. It's a proactive step that gives your business the advantage of time.
Helping You Make Strategic Moves for Your Business
If you’re thinking of creating a new business entity soon, I encourage you to do it NOW before the end of the year so you can take advantage of the year-long window to file your Corporate Transparency Act report for existing businesses.
And don’t wait until the end of December to get started, as we anticipate there will be a rush of new business entity filings at the end of December as business owners and their professionals rush to file their creation documents before the new year.
As your LIFTed Business Advisor, I can help you create a new business entity before the January 1st deadline so you can take advantage of the extended filing deadline for existing businesses. But my approach to serving my business clients doesn’t end when the paperwork is filed. I’ll work with you to ensure any business you own has the Legal, Insurance, Financial, and Tax structures it needs to run smoothly from its first day to its last.
Schedule a complimentary call with my office using the button below to learn more.
This article is a service of a Personal Family Lawyer®. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices with your business throughout life and in the event of your death. We also offer a LIFT Business Breakthrough Session™, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.
The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.