The Corporate Transparency Act: Crucial Timelines for Business Owners

The Corporate Transparency Act (CTA) and its associated reporting requirements remain subject to ongoing legal developments. Recent court rulings have temporarily affected enforcement timelines and deadlines.

Aspiriant continues to monitor the situation closely to provide our clients with the most accurate and timely guidance. While the specifics of compliance deadlines may change, businesses are encouraged to prepare for eventual compliance by gathering beneficial ownership information and staying informed about regulatory updates.

For the latest updates, please consult trusted legal or financial advisors or visit the Financial Crimes Enforcement Network (FinCEN) website.

Current Status: As of Dec. 27, 2024, the enforcement of the Corporate Transparency Act (CTA) is temporarily paused due to a nationwide injunction. The previously extended reporting deadline of January is currently on hold pending further legal developments.

About the CTA

If you own or manage a business, regardless of its size, understanding the Corporate Transparency Act (CTA) is crucial. Enacted as part of the Anti-Money Laundering Act of 2020, it marks a significant milestone in ensuring corporate accountability. By shining a light on company ownership, the CTA helps prevent financial misconduct like money laundering, tax evasion and financing of terrorism. Compliance with the CTA not only ensures your business aligns with new legal standards—helping you avoid severe penalties—but also reinforces the integrity of your operations. These business compliance tips will help you navigate the requirements effectively.

What does this mean for reporting companies?

• For those who have already reported: No further action is required at this time. Updates to FinCEN IDs or previously submitted BOIRs are not needed unless the injunction is overturned and enforcement resumes.
• For those who have not yet reported: While the current injunction pauses the filing requirement, we recommend that companies continue preparing for compliance by gathering information on their entities’ beneficial ownership. If the ruling is overturned, though presumably, an extension will be granted in that case, deadlines could be reinstated quickly, leaving little time for adjustments.

What is the Corporate Transparency Act?

Under the CTA, companies are now mandated to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau operating under the U.S. Department of the Treasury. FinCEN’s fundamental objective is to safeguard the financial system from illicit activities through gathering, analyzing and sharing financial intelligence. They are also responsible for strategically employing financial regulations and authorities. Here is a helpful link from FinCEN to frequently asked questions.

Key provisions of the Corporate Transparency Act:

Covered vs. exempt companies:

• Covered companies: The CTA applies to a wide range of entities, including corporations (both C-corporations and S-corporations) formed under state law, as well as domestic and foreign limited liability companies (LLCs), regardless of their membership structure. It also extends to other similar entities created through official filings with state or tribal offices, such as partnerships or trusts formed for business purposes.
• Exempt companies: Certain entities are exempt from this reporting requirement, such as regulated entities like banks and credit unions and large operating companies with more than 20 full-time employees, over $5 million in gross receipts or sales and a physical office in the U.S.

Reporting requirements:

At present, a nationwide injunction temporarily halts these requirements, including the previously established Jan. 1, 2025, deadline. If the injunction is lifted, reporting companies may need to comply with these requirements, including filing initial reports and updating information within 30 days of any changes.

• Beneficial ownership information: Covered companies must submit beneficial ownership information to FinCEN, which includes each beneficial owner’s personal information, such as full legal name, date of birth, residential or business address and unique identifying number (such as a driver’s license or passport number).
• Definition of beneficial owner: A beneficial owner is any individual who directly or indirectly owns or controls 25% or more of the ownership interests in an entity. This also includes individuals who exercise substantial control over a reporting company. Examples of such individuals include senior officers like the president/CEO, chief financial officer, general counsel or chief operating officer, the manager of an LLC, and the general partner of a limited partnership.

Ownership privacy:

FinCEN will maintain a secure, non-public database containing the beneficial ownership information covered companies provide. Law enforcement agencies and other authorized entities can access this information to investigate financial crimes, such as money laundering and terrorist financing.

Note: FinCEN is currently accepting beneficial ownership information reports on a voluntary basis. However, enforcement of the Corporate Transparency Act is paused due to the reinstated nationwide injunction as of Dec. 26, 2024.

Penalties for non-compliance:

Failure to comply with the reporting requirements of the CTA may result in civil and criminal penalties, including fines and imprisonment. Intentionally providing false or misleading information to FinCEN is subject to severe penalties. As of this article’s publish date, penalties are estimated as follows:

• Civil penalties: Up to $500 per day of violation, adjusted annually for inflation (currently $591).
• Criminal penalties: Up to two years imprisonment and a fine of up to $10,000.

Currently, FinCEN may not impose penalties for non-compliance while the injunction remains in effect. However, the situation is fluid, and enforcement may resume with updated deadlines if the injunction is lifted again.

Stay ahead of the changes

Despite the current injunction, Aspiriant recommends preparing for eventual compliance with the CTA. Gathering necessary beneficial ownership information and staying informed about legal developments will position your business to respond promptly when enforcement resumes. Contact your attorney, wealth manager or tax advisor for guidance. Aspiriant will continue monitoring this situation closely and will provide updates as they become available.