Treasury Department Finalizes Corporate Transparency Act Beneficial Ownership Rules
The Corporate Transparency Act (CTA) took effect on January 1, 2024, requiring millions of small businesses and LLCs to report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). Entities formed before 2024 have until January 1, 2025 to file, while new entities must file within 90 days of formation.
A beneficial owner is any individual who owns or controls at least 25% of the entity or exercises substantial control. Reports must include the owner's name, date of birth, address, and a government-issued ID number. Penalties for non-compliance include civil fines up to $500 per day and criminal penalties up to 2 years imprisonment.
Significant litigation challenges the CTA's constitutionality. In March 2024, a federal court in Alabama ruled the CTA unconstitutional, though the ruling applied only to the specific plaintiffs.
Practical Impact
Small business owners and their advisors must prioritize CTA compliance despite the legal uncertainty. Entities should identify their beneficial owners, gather required information, and plan for timely filing. Legal challenges may ultimately affect the law's scope, but non-compliance risks are significant until the courts provide definitive guidance.
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.