Comply or pay the price!

On March 13th, Brandon Jones of Haynes Boone, an EO Fort Worth Strategic Alliance Partner (SAP) presented some great information that applies to almost all of our businesses. See the pdf full deck about the corporate transparency act here. It also has great info about entity types and tax rates.

What Do You Need to Know About the Corporate Transparency Act?

The Corporate Transparency Act (CTA), effective from January 1, 2024, marks a significant shift in the regulatory landscape for businesses in the United States. Aimed at enhancing transparency within entity structures, the CTA seeks to combat money laundering, tax fraud, and other illicit activities by establishing a new reporting requirement for Reporting Companies. These companies, unless exempt, are now obligated to file a Beneficial Ownership Information (BOI) Report with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCen). This report must detail information about the company, its beneficial owners, and the individuals involved in creating or registering the entity. The access to this information is primarily granted to U.S. and foreign government agencies, including the U.S. Department of Treasury, to aid in their investigative and regulatory efforts.

The CTA delineates specific entities that fall under the category of Reporting Companies, including any domestic entity formed by filing a certificate of formation or similar document with the Secretary of State or similar office, as well as any foreign entity that files a certificate of foreign registration. However, the Act also outlines 23 exemptions, generally for entities already subject to significant regulation or reporting requirements. These exemptions include banks, publicly traded companies, broker-dealers, insurance companies, investment funds, tax-exempt entities, and large companies with more than $5 million in gross receipts and over 20 full-time employees.

Key takeaways for businesses include:

  • Reporting Requirements: Legal name, trade name, business address, jurisdiction of formation, and Employer Identification Number (EIN) for Reporting Companies; legal name, date of birth, identification number, and document for Beneficial Owners and Company Applicants.
  • Filing Deadlines: Entities existing before 2024 have until January 1, 2025, to file. Entities formed in 2024 have 90 days from filing, and those formed after 2024 have 30 days. Changes in reported information must be updated within 30 days.
  • Penalties: Non-compliance can result in a $500 per day penalty, up to a $10,000 maximum, alongside potential criminal penalties.

The CTA’s introduction is a pivotal moment for business planning and tax issues, emphasizing the importance of compliance and the potential implications for business operations. As the legal landscape evolves, companies must stay informed and prepared to meet these new requirements, ensuring transparency and accountability in their business practices.

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