December 31, 2024 is an important deadline under the new Corporate Transparency Act (CTA). As a lawyer who serves small and medium-sized businesses, I have followed closely the litigation challenging it. No court decision has delayed the upcoming deadline. If you are required to report your business under the CTA by 12/31/2024, my recommendation is to comply. I do not expect the legal landscape to change by that date.
As a reminder, the Financial Crimes and Enforcement Network (FinCEN), which is part of the U.S. Department of the Treasury, enacted the CTA effective 1/1/2024, to require that most small and medium-sized businesses report and verify the identity of the person or people who own or control the business. The company must also report its legal and trade names, principal business addresses, jurisdiction of formation, and Tax ID number. Because US laws on forming corporations and LLCs have allowed a great deal of anonymity, the bad guys of the world – terrorists and criminals – have used them to do bad things relatively undetected, especially when one corporation or LLC owns another, which owns another. The CTA allows law enforcement to look through the corporate structure to see who actually owns or controls a particular business. The database is not publicly available.
Unless your corporation or LLC falls within one of the 23 exceptions in the Act, you must report the Personal Identifying Information (PII) of who controls/owns it (which is called the Beneficial Owner Information or BOI). The CTA does not apply to general partnerships, sole proprietorships, or 501(c) non-profits. Prior posts on my website discuss the exemptions and other aspects of the CTA.
The 12/31/2024 deadline requires businesses that (a) existed before 1/1/2024 and (b) fall under the CTA to report to FinCEN the identity (including a photo ID like a driver’s license or passport) of any person who, directly or indirectly, has substantial control over the entity or who owns or controls at least 25% of the ownership interests. For substantial control, think people who, regardless of their title, have the ability to shape company-wide policies: CEOs, CFOs, Officers, Board of Directors/LLC Managers, etc.
Since most businesses that currently exist were formed before 1/1/2024, this 12/31/2024 deadline affects a great number of companies. (Companies that formed during 2024 were required to report within 90 days of their Articles being filed by a Secretary of State’s office. If your company formed in 2024, be sure you’ve complied, and if not, catch it up now.) If you are thinking ahead, if you form a company on or after 1/1/2025, you will be required to register within 30 days of your Articles being filed.
Penalties for failure to report are significant. A willful failure to register carries a civil fine of $500 per day, and criminal fines of up to $10,000 or 2 years imprisonment (or both). It does not seem likely that FinCEN will start assessing a $500/day fine as of 1/1/2025, but they have the authority to do so – and at some point, they certainly will. By comparison, registration is FREE online at https://www.fincen.gov/boi.
If you have someone else handling this, be careful. Beware of scammers simply looking to harvest your PII. Others are legitimately registering you, but hope you don’t realize you could file for free. No matter who makes the report, when you scan your driver’s license or passport, don’t send it to yourself by unencrypted email, for security reasons. Instead, use a scanner connected to the computer system you are using to file, or use a scanner app on your phone (then use your phone to access the registration portal).
Here is a link to Small Entity Compliance with the CTA, which you may find helpful: https://www.fincen.gov/boi/small-entity-compliance-guide.
Kim K. Steffan is an attorney with Steffan & Associates, P.C. in Hillsborough. She can be reached at (919) 732-7300 or kim.steffan@steffanlaw.com.