Regulatory compliance is crucial to the success of any modern business. The failure to adhere to both state and federal regulations could lead to a loss of licensing or financial penalties. As a result, executives and business owners are often familiar with existing statutes that apply specifically to a particular industry. However, they also need to stay up to date on the regulations that apply to their business, as they change all the time.
For example, a law passed by federal lawmakers in 2021 just took effect on the first of the year. The Corporate Transparency Act (CTA) was a bipartisan piece of legislation that created a new requirement for certain businesses. Organizations may need to file a report with federal agencies or could be at risk of large fines of up to $10,000 for non-compliance.
What businesses must file a report?
As the name implies, the CTA specifically applies to corporations and other businesses where ownership is not readily evident. Limited partnerships and limited liability companies (LLCs) are also required to file a report under the CTA. Companies must disclose the identities of all individuals with a beneficial ownership interest (BOI) to the Financial Crimes Enforcement Network (FinCEN).
What constitutes a beneficial ownership interest?
The CTA provides a very clear definition of BOI. The company filing the report must include identifying information about any investor who has at least a 25% ownership interest in an LLC, corporation or other business with an opaque structure. The report should also include details about who filed the paperwork to form the company.
When is the report due?
Businesses already operating as of January 1st, 2024 have until the beginning of 2025 to file their initial reports. Businesses formed after the CTA took effect must make ownership disclosures during the startup process. Additionally, updated reports are necessary anytime new investors meet the requirements for having a BOI in the company.
It is very easy for those focused on the operations of a business to overlook changes in the law that could end up costing them quite a bit of money. Reaching out to the team at Goodkin APC can help business owners, executives and investors better ensure ongoing regulatory compliance even as the law evolves.