Need-to-Know Info: The Corporate Transparency Act

Dear Valued Client:

Our sights are set on supporting the realization of your business’s vision. As such, when legislation that may impact your operations/objectives are issued or updated, such as the Corporate Transparency Act (CTA), we’ll contact you with need-to-know-information, and how we can help.

Effective January 2024, small business owners, like yourself, will be required to comply with the CTA, which will involve filing with the Financial Crimes Enforcement Network (FinCEN) within the U.S. Treasury Department.  

This filing will require you to disclose certain management and ownership information regarding beneficial owners (i.e., the individuals who own or control your company)— according to a series of complex filing rules, which include exemptions to subsets. And yes, there are non-filing fees (see the Q&A below).

We’re here to advise you on the ins and outs of the CTA and filing with the FinCEN. You can engage our expertise through an additional service agreement in 2024, as well as in years to come since changes must continue to be reported.

Ensuring your company’s records are current and appropriately filed in the FinCEN database requires due diligence and risk assessment. 

That said, our engagement and fee to file are separate from a retainer agreement and tax work.

Upon receiving final instructions from the FinCEN in a few weeks, we will share additional details and next steps.

In the meantime, to learn more, please review the following set of FAQs.

And, if you have immediate questions, please contact sonya@gsm.biz or gus@gsm.biz.

A: Reporting companies are identified as either domestic or foreign as follows:

• Domestic reporting companies are corporations, LLPs, or any other entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.
• Foreign reporting companies are a corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office. 
• Please note: Sole-proprietorships that don’t use a single-member LLC are not considered a reporting company.

A: Companies who typically report include limited liability partnerships; limited liability limited partnerships; business trusts; and most limited partnerships, in which entities are generally created by a filing with a secretary of state or similar office.

A: Those who are likely exempt from filing include securities issuers, domestic governmental authorities, banks, and many more that don’t fall into the above categories.

A: Non-compliance can result in high penalties, with fines ranging from $500-$1k per violations, as well as possible imprisonment (up to two-years).

A: First enacted in 2021, the corporate transparency act was passed to enhance transparency in entity structures and ownership to combat money laundering, tax fraud, and other illicit activities.

A: The Corporate Transparency Act is designed to improve business activity transparency through the reporting of Beneficial Ownership Information (BOI) and primarily targets smaller businesses. According to a recent Small Business Administration report, 27,104,006 small businesses were termed “non-employer firms” and had no employees.

Best Wishes for a Wonderful Thanksgiving Holiday!

The GSM Advisory Group