In 2020, Congress asked for a new law called the Corporate Transparency Act. The purpose of the law was to require entities who might be laundering money or otherwise doing illegal financial transactions to register with a section of the Treasury Department called the Financial Crimes Enforcement Network (FinCEN).
Who must report: all small businesses with 21 or fewer employees or less than $5 million in gross revenue must register with FinCEN. This includes corporations, general liability, partnerships, limited liability companies, but not sole proprietorships. In addition, Not-for-profit organizations do not have to register under the act.
In addition, organizations that have dissolved must also register with the US Treasury. This includes organizations that have voluntarily dissolved, involuntarily dissolved or merged with another organization.
The company will be required to report the name, address, birthdate or date of formation, SSN or FEIN of all beneficial owners. This can include trusts and estates that own an interest in the reporting company.
What if the information changes? If the beneficial ownership changes you (or the new owners) must report the changes within 30 days.
Deadline: organizations formed in 2024 must register within 90 days. Organizations formed in 2023 must file no later than December 31, 2024.
Penalties: the penalties for failure to file are severe. They can include jail time, penalties of up to $591 per day or other civil penalties. It is important that you register early and do not wait until the last minute. The treasury estimates that 33 million organizations will meet to file.
Is the law constitutional? You may have heard that a district court in Alabama declared the act unconstitutional. However, this was limited to members of a particular small business organization and does not apply to small businesses generally. The courts will take some time to go through these issues and will not have the case resolved by December 31. Therefore, you will still need to register with FinCEN.
Please call us if you need assistance registering or if you have questions about whether to register. We will need to gather information about the owners of the business before we proceed. If you have questions, please call or e-mail.
