CTA Compliance: Step-by-step Guide on How to Stay Compliant With Corporate Transparency Act

CTA Compliance: Step-by-step Guide on How to Stay Compliant With Corporate Transparency Act

Have you ever seen people spend up to 2 years in prison? Do you know that not all these people committed very serious crimes? Since January 1, 2024, most businesses operating in the US have been subjected to the Corporate Transparency Act (CTA). Not complying with this act can land business owners in prison for up to two years, with a fine of up to $10,000.

According to this act;

  • If you own a foreign or domestic reporting company that was already registered with a secretary of state’s office before January 1, 2024, you’re expected to submit to FinCEN your initial beneficial ownership information (BOI) report by the end of year 2024 (December 31).
  • If you own a reporting company that was registered on January 1, 2024, or after, you need to file a BOI report after being notified of the effectiveness of its formation. In this case, you only have 90 days to file your BOI report.

If your business is affected by this act, you need to understand that CTA compliance is a must. To avoid being penalized, you need to do all you can to comply with the various requirements for filling beneficial owner reporting.

  • What are the different penalties associated with not complying with the Corporate Transparency Act requirements?
  • How to stay compliant with CTA requirements?

As you read further, you’ll find answers to these CTA-related questions.

Understanding the penalties associated with noncompliance with CTA

As earlier mentioned, CTA compliance is crucial for most businesses operating in the United States today. Failing to comply with this act due to one or more reasons may attract different types of penalties. But before we go ahead to describe these penalties, you need to first understand the different categories of CTA violations.

According to the Corporate Transparency Act, these violations are divided into three different categories:

1.  Deliberate failure to file a beneficial ownership information

This violation occurs if your firm (a reporting company) fails to file the required initial BOI report. This violation attracts penalties in fines of up to $500 daily for as long as the violation continues (all capped at $10,000). In addition, up to two years jail time is possible.

2.  Providing inaccurate or wrong BOI

You’re also going to be penalized if your reporting company intentionally ends up providing inaccurate or wrong beneficial ownership information. The penalty could also be as severe as $500 daily (capped at $10,000) and a jail time of up to 2 years. The same thing goes for reporting companies that willfully fail to update accurate information.

3.  Unauthorized BOI disclosure

This CTA violation attracts even a stricter penalty. If found guilty, a reporting company or individual, which access information from BOSS when not authorized may receive a penalty of up to $500 fine daily (capped at $25,000). In addition, the reporting company or individual may also attract up to 5 years in prison.

Effective tips for staying compliant with CTA

To avoid the aforementioned penalties, it’s only normal for reporting companies to plan for CTA compliance. To do this, here are a few step-by-step guides for you:

●    Is your firm a reporting company?

You should start by understanding whether or not your firm is a reporting company. As earlier mentioned, the majority of businesses running in the US qualify as reporting companies. However, the CTA specifies 23 exemptions.

That said, your organization mostly qualifies as a reporting company if it’s a corporation or limited liability company (LLC). The same thing also applies if the organization was registered or established by filing a document with a secretary of state or a related body.

●    Does your company meet the criteria for exemption?

If your organization meets the CTA’s criteria for exemption, then you have nothing to worry about.

●    Is your organization a reporting company?

If you run a reporting company, below are a few step-by-step guides we expect you to follow for CTA compliance:

  1. If applicable, ensure to update your company’s LLC operating agreement.
  2. Next, you need to identify your company’s beneficial owners for reporting.
  3. Who is/are your company’s applicant(s)? You need to identify at most two applicants and include them in your FinCEN reporting.
  4. Next, you need to acquire the necessary information regarding your organization. These include the company’s full legal name, DBA name, current US address, jurisdiction, and taxpayer identification number.
  5. You need to gather accurate information regarding your company’s beneficial owner for reporting. This information includes the name, residential address in the US, date of birth, ID number, etc.
  6. Furthermore, you need to gather information about the applicant(s).
  7. After gathering all information, ensure to cross-reference the already gathered information with supporting documents.
  8. Lastly, file your company’s beneficial ownership information reporting to FinCEN.

Do you need help planning for CTA compliance? If yes, you can rely on FinCEN reporting today.