What is the Corporate Transparency Act?
BIG CHANGES FOR SMALL BUSINESSES
An Estimated 32.5 Million Small Businesses Will be Burdened by the Corporate Transparency Act
The Corporate Transparency Act is the most robust anti-money laundering legislation since the Patriot Act, passed in 2001 in response to the terrorist attacks of 9/11. A congressional presidential veto override passed the Act into law on January 1, 2021. The primary objective of the Act is to create a national database of information identifying individuals who, directly or indirectly, own a substantial interest in or hold significant control over certain types of entities. If you are a small business owner, you must register with and continually update information in this database.
Beneficial Ownership Secure System
The Corporate Transparency Act Requires all existing and future entities filed with the secretary of state to personally inform a national database called the Beneficial Ownership Secure System (BOSS). Law enforcement agencies, taxing authorities, and a few other potential users for specified purposes will have access to the national database upon request.
Who is Affected by the New Regulations?
Entities Filing with the State: With a few exceptions, all existing and future corporations, limited liability companies, and other legal entities are created by filing a document with the Secretary of State or a similar office under the law of the state.
Beneficial Owners: Any individual who directly or indirectly exercises substantial control over a reporting company or owns or controls over 25 percent of ownership interest.
Company Applicants: Any individual who files the document with the State (Ison Law generally serves as a company applicant for our clients).
What Must Be Reported?
The Corporate Transparency Act goes into effect on January 1, 2024. Any businesses filed after that date will have 30 days to register with the national database. Any companies filed before January 1, 2024, will have until the end of 2024 to register with the national database.
The following information must be provided for compliance with the Corporate Transparency Act:
1. The company’s full legal name and any other trade name or dba used by the company.
2. The principal place of business of the company.
3. The EIN for the company.
4. The full legal name of all Beneficial Owners.
5. The residential street address of the Beneficial Owners.
6. An identifying number from a passport, license, or state-issued ID card.
7. An image of the passport, license, or ID card.
If any of the above information changes during the company’s existence, the reporting company must update the national register. Violation of the reporting requirements is subject to penalty. A civil penalty of up to $500 per day may be imposed for an individual’s reporting violation until the violation is remedied. A criminal fine of up to $10,000 and/or imprisonment of up to two years may also be imposed.
What Should I Do? A Year to Prepare
Knowing about the Corporate Transparency Act now allows us a year to prepare. There has yet to be an implementation of processes or infrastructure for compliance with the Corporate Transparency Act. We will continue to monitor and provide updates on when and how this affects our clients.
Please call us to discuss the Corporate Transparency Act and what it means for your situation.