Key Provisions and Impacts of the CTA

The much-anticipated Corporate Transparency Act (CTA) will be in full swing starting January 1, 2024. This act introduces fresh federal filing protocols for the majority of corporations and limited liability companies (LLCs) established in 2024 and beyond.

Designed to deter illicit activities like money laundering and tax evasion by anonymous shell companies, the CTA impacts both legitimate business proprietors and those with ill intentions.

Beneficial Ownership InformationWhich Businesses are affected?

Not every new business venture falls under the CTA’s radar. Only entities, namely corporations and LLCs, that register with state secretaries or equivalent authorities are affected, leaving sole proprietors exempt.

Exemptions Under the CTA

A few specific business categories are also exempt, including:

  • Large-scale businesses, specifically those boasting over 20 full-time workers and raking in $5 million based on the previous year’s tax return. However, this exemption may not be relevant during initial formation due to the absence of a prior-year tax record.
  • Government-regulated entities like banks and insurance firms.
  • Nonprofit organizations.
  • A few additional entities.

Identifying Beneficial Owners

At its core, the CTA aims to assemble an extensive government directory detailing the “beneficial owners” of most business forms. These beneficial owners are individuals exerting significant control or ownership over the entity. In many instances, pinpointing these owners is straightforward. Yet, businesses with intricate ownership frameworks might face challenges.

For entities established in 2024, a beneficial owner information report must be submitted to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) within 90 days of inception (The proposal to move the timeframe to 90 days has not yet been approved, so it still sits at 30 days). All entities already created have to provide their ownership information as well, but have all of 2024 to do so. This literally affects everybody.

This report should encompass:

  • Full legal name.
  • Date of birth.
  • Complete current residential address.
  • A unique identification number from a valid ID, whether it’s a U.S. passport, local ID, driver’s license, or foreign passport.
  • A snapshot of the ID bearing the unique identification number.

This information is also required for individuals responsible for filing formation documents, such as articles of incorporation or organization.

BOSS: The New Reporting Platform

Submissions are made to a newly minted federal platform, the Beneficial Ownership Secure System (BOSS), accessible from January 1, 2024. The good news? No filing fees are attached. The data collected is exclusively for law enforcement, IRS, and other government agencies, ensuring no public disclosure.

To sum it up, while BOSS reporting stands distinct from state and local filings, it’s imperative to integrate it into the standard procedure for launching most new business entities from 2024 onwards. Learn more at the Financial Crimes Enforcement Network website.