The Federal Corporate Transparency Act (CTA), takes effect January 1, 2024, and requires most Florida companies to submit a specific online report containing the personal information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Companies created before January 1, 2024, will have until January 1, 2025, to file their initial reports, and non-compliance can lead to substantial financial penalties. Companies formed after January 1, 2024, will have shorter periods to submit their electronic report.
Why Are We Doing This? Both major parties in Congress supported the CTA in an attempt to combat financial fraud. Shell companies (aka: “ghost companies”) are not illegal to own or have, but they are often used for underhanded illegal purposes like tax evasion, defrauding investors, and money laundering.
Who Has To Report? Almost all small businesses. The CTA uses the term “Reporting Company” which means corporations, LLCs, limited partnerships, and similar entities created by filing documents with any US state.
What Gets Reported? Companies are required to provide detailed information about themselves, their beneficial owners, and, for entities formed after January 1, 2024, company applicants. This information includes:
- Company Information: This includes the company’s legal name, trade name, address, state of formation, and EIN (Employer Identification Number).
- Beneficial Ownership Information (BOI): Companies must identify their “Beneficial Owners”, who are the people who control the company or own over 25% of the ownership interests. The rules broadly define what “control” means to include individuals with influence over the company management or influence over important company decisions.
- Company Applicants: For entities formed after January 1, 2024, up to two company applicants must be identified. These are the individuals directly responsible for filing the state-level documents that create or register the company.
For every beneficial owner and company applicant, the report must include their full legal name, date of birth, current residential address (or business address for company applicants), and relevant identifying information from documents like US passports or driver’s licenses.
How Is It Reported? We don’t know exactly what the system for submitting these BOI reports will look like. The submission website, called Beneficial Ownership Secure System (or “B.O.S.S.”), isn’t ready yet.
Exceptions to Reporting: The CTA and its regulations provide 23 exemptions to the reporting requirements that mainly apply to highly regulated businesses, including banks, large operating companies, publicly traded companies, and tax-exempt entities.
Penalties: The CTA establishes both civil and criminal penalties for non-compliance, specifically:
- Civil penalties for willfully failing to report or update a reporting company’s BOI, including a daily fine of $500 for each continuing violation, up to a maximum of $10,000.
- Criminal penalties, which can lead to up to two years’ imprisonment.
Unfortunately, the CTA does NOT include any provisions for non-willful or negligence-related violations. Put differently: “I forgot,” or “It wasn’t my job,” will not spare you from the penalties listed above.
Conclusions: We want to emphasize to our clients (and all Florida business owners) that they should take the time to understand the implications of the CTA and its reporting obligations. If you have questions about CTA, or how our firm can help your company comply with the new law, please don’t hesitate to call our office. We’re happy to help!