What To Do If Your Business Receives a CTA Non-Compliance Notification?
How To Rectify Corporate Transparency Act Compliance Errors
The Corporate Transparency Act was put into effect at the beginning of 2024 and requires all reporting companies that operate within the United States to send in beneficial owner information to the Financial Crimes Enforcement Network. This new requirement was put into place to help prevent illicit activities that were happening behind the veil of businesses.
Over 32 million companies will be affected by the Corporate Transparency Act and the clocks have started ticking on when the initial beneficial ownership report is due. Given the hefty penalties for not complying, businesses are wondering how to comply and what happens if they receive a non-compliance notification.
Deadlines for Filing the Initial Beneficial Owner Report
The first step to complying is knowing the deadlines. The deadlines for reporting initial beneficial owner reports can vary depending on whether the business existed before 2024 or became an entity January 1, 2024 or after.
For companies that existed before January 1, 2024, they have a year from when the Corporate Transparency Act goes into effect making their deadline January 1, 2025. For companies that were registered between January 1, 2024 and January 1, 2025, they will have 90 days from receiving notice that their company is officially registered.
Lastly, for companies that are created on or after January 1, 2025, they will have 30 days from notice that their company is officially registered .
Penalties for CTA Non-Compliance: What Businesses Need to Know
Non-compliance with the reporting requirements can result in significant penalties. The penalties for failing to comply with these requirements are as follows:
- Civil Penalties: Entities that unintentionally fail to report beneficial ownership information or report inaccurately may face a civil penalty of up to $500 for each day the violation continues.
- Criminal Penalties: Willfully Failing to report, or providing false or fraudulent beneficial ownership information can result in fines of up to $10,000 and imprisonment for up to two years.
These penalties underscore the importance of timely and accurate compliance with the CTA’s reporting requirements. Companies should ensure they have information in place so they can comply as soon as they can.
What if I Accidentally Missed the Deadline to File Beneficial Ownership Information
According to the Financial Crimes Enforcement Network, they are working hard to ensure all companies are aware of how to comply with the new requirements. They understand that mistakes happen and allow a timeframe for the mistakes to be corrected.
For mistakes and omissions on a report, a company will have 90 days from the deadline to rectify the problem in order to avoid penalties. However, with both civil and criminal penalties for those that disregard the requirements,if your company receives a non-compliance notification, it is in your best interest to comply right away.
How to Comply with the Corporate Transparency Act Requirements
To comply with the Corporate Transparency Act requirements, entities need to follow several key steps to ensure they accurately report their beneficial ownership information to the Financial Crimes Enforcement Network.
Is Your Company Subject to the Corporate Transparency Act? Find Out Here
Generally, companies that are created by filing a document with a secretary of state or similar office are subject to the Corporate Transparency Act requirements and labeled as “reporting companies”. Reporting companies include:
- C-Corps
- S-Corps
- Limited Liability Companies
- Limited Liability Partnerships
- Limited Partnerships
- Business Trusts
- Other similar entities
Certain entities are exempt from reporting, such as large operating companies with over 20 employees and $5 million in gross receipts, regulated entities like banks, and inactive entities meeting specific criteria.
How to Identify Beneficial Owners & Company Applicants Under the CTA
Once a company has been identified as a reporting company, they must identify who their beneficial owners are. According to FinCEN, a beneficial owner is any individual who, directly or indirectly, owns or controls 25% or more of the entity or who exercises substantial control over the entity. For each beneficial owner, the following information must be reported:
- Full legal name
- Date of birth
- Current residential address
- Number from official Identification document.
- Scan of above document
If a company is registered on or after January 1, 2024, they must also identify their company applicants. A company applicant is the individual who files the document that creates a corporation, LLC, or similar entity, or the individual primarily responsible for directing or controlling such filing. This typically includes lawyers, paralegals, or company officers. Company applicants must provide the same information as beneficial owners.
Reporting Changes in Beneficial Ownership
When a change happens to a beneficial owner within a company, the company must report said change within 30 days of the change occurring. This includes changes such as:
- Change in Ownership: If an individual acquires or disposes of 25% or more of the ownership interest in the entity.
- Change in Control: If an individual gains or loses substantial control over the entity.
- Change in Beneficial Owner Information: If there are changes in the previously reported information about a beneficial owner, such as changes in name, address, or identification number.
When reporting changes, the company must provide updated information for each beneficial owner including all the previous information with the addition of the specific details about the nature of the change.
Ensure CTA Compliance by Working with Our Skilled Attorneys!
Our team at Corporate Transparency Act Filing Services will help you accurately identify and report beneficial ownership information, ensuring all changes are submitted within the required timeframe. We provide comprehensive guidance on maintaining compliance, minimizing the risk of costly penalties.
Contact us today to ensure compliance and safeguard your business against regulatory challenges.
Corporate Transparency Act Filing Services
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