Almost everyone who owns a corporation, limited liability company (“LLC”) or other “reporting company” as that term is defined by the Corporate Transparency Act (“CTA”) must provide information to the federal government about the company by the end of 2024 or face stiff civil and criminal penalties. The CTA went into effect January 1, 2024.
The stated purpose of the CTA is to combat money laundering and other financial crimes. But it affects millions of small business owners. More than 100,000 limited liability companies are formed each year in N.C. Many of these LLCs are created and owned by one person or by a married couple to hold a few rental properties or a farm. More than 14,000 corporations were created in N.C. last year. Most of these LLC and corporations will be considered reporting companies.
The CTA requires reporting companies to file information on their beneficial owners with the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of Treasury, and to file updated reports within 30 days of any change in information previously reported. If your business was formed prior to 2024, you have until the end of this year to file. However, if you filed a new reporting company in 2024, you must provide this information within 90 days of formation.
The person filing the initial report on behalf of a company must certify that the report is true, accurate, and complete. For each beneficial owner, you must provide detailed information, such as name, date of birth, residential address, and ID number from a valid passport, driver’s license, or state identification card.
The willful failure by a reporting company, its senior officers, or a beneficial owner to comply with the CTA’s requirements and timely provide accurate information to FinCEN can result in both civil penalties and criminal prosecution.
We represent dozens of small businesses, and plan to continue to do so. But because of the substantial potential penalties and the logistics of collecting accurate beneficial owner information and staying current on ownership changes and any changes of address for beneficial owners, we cannot undertake the initial filing of beneficial owner information or any update reports of changes to the beneficial owner information or provide advice about filing. There are companies who are in a better position to handle this than us and offer these services for a minimal fee. We encourage you to look into this further, determine your reporting requirements, and consider hiring a company to handle these services.