The Corporate Transparency Act is a federal law designed to prevent certain illegal financial transactions. Recently created regulations known as the Beneficial Ownership Information Reporting Requirements have effectively implemented the law.
If you formed a New York limited liability company or corporation, you’re subject to these laws and regulations. The New York business lawyers of Rosenbaum & Taylor explain what your company needs to know.
What Is the Corporate Transparency Act (CTA)?
The Corporate Transparency Act was passed as part of the broader Anti-Money Laundering Act of 2020. The basic aim of this law is to prevent money laundering and illegal hiding of assets. The law requires beneficial owners (see below) of certain business entities to report their identity and location.
Under the law, the US government can collect information from owners to make sure the following aren’t occurring:
- Money laundering
- Tax evasion
- Fraud
- Corruption
- Other financial crimes
Even small companies are subject to this law and the related regulations. If you have filed documents with the New York Secretary of State, you need to understand your obligations. A New York business lawyer can help you determine whether this law applies to your organization.
Reporting Requirements
So-called “reporting companies” like LLCs and corporations must report certain data. This includes the business’s full name (including any DBA), principal office location, and more. There are some exceptions but they likely won’t apply to your business.
A “beneficial owner” of a company must report their name, date of birth, and address. An identifying document like a passport must also be submitted. As defined, a beneficial owner is someone who controls or owns at least 25% of the LLC or corporation. Anyone who makes substantial decisions affecting the business may be considered a beneficial owner as well.
If your business was formed before January 1, 2024, you have one year to file the initial reports. Those formed after January 1, 2024 have 30 days to report.
The government is working to build electronic reporting systems to make the process easier. The government is also promising to issue compliance guidelines about the new rules. But you can check with a New York business law attorney to learn about your reporting duties.
Essentially, if you own, operate, or control a business, there is a good chance the CTA will apply to you. It’s imperative that you provide complete and accurate information about your company to the reporting authorities. Our team can advise you and your company if you want to learn more about these duties.
Potential Violations for Non-Compliance
If you fail to comply with the law, you could be subject to significant monetary penalties. These could include civil penalties of up to $500 per day while the violation persists. You could even face criminal penalties of up to $10,000 and/or two years in prison.
Obviously, these are serious punishments that could be financially devastating to your business. We are here to help businesses comply with the rules so they don’t have to worry about such penalties.
Our Firm Can Help You Understand the CTA
Do you have questions about the Corporate Transparency Act? Are you concerned about compliance requirements or whether the law applies to your business? Our New York corporate and business lawyers are here to guide you.
We can explain how the law works and what your responsibilities under it are. Then, we can help you take steps to bring your business into compliance and avoid unnecessary penalties. To learn more, give Rosenbaum & Taylor a call today.
