The Corporate Transparency Act (CTA) went into effect on January 1, 2024. It was created to increase transparency in business ownership and help prevent illegal activities like money laundering and tax evasion. The CTA requires many businesses to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Beneficial owners are individuals who own or control at least 25% of a company or have significant control over it.
New compliance requirements
Under the CTA, businesses in California and across the United States must now disclose detailed information about their beneficial owners. This info includes:
- Full legal names
- Birthdates
- Residential addresses
- Identification numbers from documents like driver’s licenses or passports
For California business owners, this means additional paperwork and administrative tasks. Existing businesses formed before January 1, 2024, must submit their initial reports by January 1, 2025. New companies formed after January 1, 2024, have 90 days from their creation to file their reports. This new compliance requirement can be time-consuming and may require business owners to update their records regularly to ensure accuracy.
Moreover, publicly traded companies or those planning to go public must also file additional reports with the SEC. This includes filing annual and quarterly reports that provide detailed financial statements and disclosures about the company’s operations, management and financial condition.
Finally, the law also affects owners not involved in the day-to-day running of a business, such as spouses or ex-spouses who retain ownership stakes.
Penalties for non-compliance
Failing to comply with the CTA can result in significant penalties. Businesses that do not submit the required information on time may face civil penalties of up to $500 per day. Willful violations can lead to criminal penalties, including fines of up to $10,000 and imprisonment for up to two years.
Given these severe penalties, business owners in California must understand and follow the CTA’s requirements. Consulting with a business law attorney can help ensure all necessary information is reported accurately and on time. An attorney can also provide guidance on maintaining compliance and avoiding costly penalties.
Still have questions?
Navigating the new CTA requirements can be challenging, especially for business owners who may not have extensive legal resources. The right business law attorney in California can offer valuable assistance in understanding the law and ensuring compliance. They can help business owners gather the necessary information, complete the required forms, and submit them to FinCEN.