We made it to 2024 and we couldn’t think of a better way to ring in the new year than with a new federal reporting requirement for your business! Totally kidding but don’t worry, it’s not at scary as it sounds. Here’s a little back story… In 2021, the U.S. Congress enacted the Corporate Transparency Act, ushering in a new era of transparency and accountability for businesses. This landmark legislation aims to combat financial crimes, money laundering, and fraud by requiring businesses to disclose their beneficial ownership information. In this blog post, we’re breaking down the key aspects of this law, addressing common concerns, and providing a step-by-step guide for compliance.
The Basics of the Corporate Transparency Act:
The Corporate Transparency Act introduces a reporting requirement for beneficial ownership information, targeting approximately 32 million businesses (so you are definitely not alone). The goal is to make it more challenging for individuals with malicious intent to conceal or benefit from illicit gains through shell companies or opaque ownership structures.
Why It Matters:
The enactment of this law signifies a significant shift towards increased transparency in the business world. The U.S. government seeks to curb financial crimes by ensuring that the true owners of businesses are identified and accountable for their actions. To alleviate concerns, it’s important to note that the process of complying with this law is expected to be relatively pain-free (cue the confetti!).
Beware of Scams:
One crucial thing we want to point out is to not fall for those email scams asking you to pay someone to file for you. This process is absolutely FREE, and you shouldn’t be shelling out cash to random folks or companies. Stay vigilant!
Understanding Beneficial Ownership Information:
So you might be wondering “What the heck is beneficial ownership information?”. It’s basically just the who’s who behind your business. Beneficial ownership information refers to the identifying details of individuals who directly or indirectly own or control a business. This includes their full legal name, date of birth, unique identifying number or state ID, and any other pertinent information.
Who Must Report:
Business entities known as “reporting companies,” are required to submit. So if you’re an LLC, a corp, or any other entity that filled out paperwork with the secretary of state to register your business – you’re on the reporting train. Foreign reporting companies, you’re in too. There are a few exemptions, and you can check them out on FinCEN’s official FAQ page here.
Key Reporting Deadlines:
- Existing businesses created or registered before January 1, 2024, have until January 1, 2025, to file their initial beneficial ownership information report.
- New businesses formed after January 1, 2024, have a 90-day window, while those established in 2025 must submit within 30 days.
Cost and Submission Details:
The beneficial ownership reporting process is entirely free, and submissions can be made online. The official form is currently available to be filed on FinCEN’s website here.
When completing the form, businesses need to provide details such as legal name, any DBAs/trade names, permanent address (excluding PO boxes), state or jurisdiction of formation, and unique identifying numbers. Beneficial owners, defined as individuals with at least 25% ownership or financial hold, must also be identified with their full legal name, date of birth, and unique identifying number or state ID.
Updates and Changes:
While annual updates are not required, any changes in beneficial ownership or alterations to provided information must be updated. This includes changes in a beneficial owner’s name, address, or unique identifying number.
Understanding and complying with the Corporate Transparency Act is crucial for businesses in the United States. By providing comprehensive information about beneficial ownership, this legislation aims to foster transparency, reduce financial crimes, and enhance overall accountability in the business sector. Stay informed, stay vigilant, and ensure that your business meets the reporting requirements to avoid fines and legal consequences.
That’s it! See, we told you it was pretty painless!
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Cheers to profit!