The Corporate Transparency Act (CTA), already in effect since January 1, 2024, for new entities and looming ahead for existing ones by January 1, 2025, is a key legislative development in the global fight against money laundering and terrorism financing. This Act mandates the disclosure of real owners in entities such as certain corporations, LLCs, and limited partnerships. The move is particularly significant for LLCs, historically used to obscure property ownership.
Penalties for Non-Compliance:
- Civil fines amounting to $500 per day without a cap.
- Criminal penalties, including fines up to $10,000 and imprisonment for up to two years in cases of willful evasion.
Responsibility and Oversight:
Responsibility for compliance falls on both the entity and its owners. A common pitfall occurs when an assumption is made that someone else, like an accountant or attorney, is handling compliance responsibilities. This can lead to unintentional non-compliance, particularly for existing entities.
Comparison with Secretary of State Filings:
Unlike public Secretary of State filings, CTA filings are confidential and accessible only to law enforcement. However, the penalties for failing to comply with the CTA are significantly more stringent.
CTA and Trusts:
Trusts are generally not directly subject to the CTA. However, if a trust owns an entity required to comply with the CTA, this can indirectly affect the trust. There is typically no CTA filing requirement for those holding assets like homes or financial accounts in trusts.
How to Tackle CTA Compliance? There Are Choices:
- Dissolving your entity: A drastic measure that relinquishes liability protection.
- Transferring ownership: Possible implications for estate planning, especially with changes expected in 2026.
- Going public or adding owners: This can be complex and unsuitable for all.
Our Role in Your Compliance Journey:
CTA compliance is an integral part of our setup checklist for new entities. We urge you to consult with us for guidance for existing entities.
Contact us today for expert assistance navigating the Corporate Transparency Act’s complexities and ensuring your business remains protected and compliant.