$10,000 Penalties per Entity

“A Texas court issued a temporary restraining order on enforcement, meaning businesses are not currently required to file reports.” - Jake Baker

Introduction:

As the Corporate Transparency Act (CTA) takes effect in 2024, businesses across the United States face significant new compliance obligations. Designed to increase transparency and combat illicit financial activities like money laundering, the CTA requires firms to report key information about their entities and stakeholders to the Financial Crimes Enforcement Network (FinCEN).

While the law’s enforcement is temporarily paused due to a federal court order, businesses should prepare for compliance now to avoid steep penalties when enforcement begins.

Who Needs to Report?

The CTA’s reporting requirements apply broadly to legal entities, including:

• Single-member LLCs, even those with minimal activity.

• Small businesses, many of which are unlikely to qualify for exemptions.

  

Key Deadlines

1. Existing Entities (before Jan. 1, 2024): Initial reports due by Dec. 31, 2024.

2. New Entities (on or after Jan. 1, 2024): Reports due within 30 days of formation.

3. FinCEN may allow a temporary 90-day filing window for entities formed in 2024, but the standard 30-day deadline will apply starting in 2025.

   

What Information Must Be Reported?

Reports must include detailed information about the entity and its beneficial owners:

• Full legal name

• Date of birth

• Residential address

• Unique identifying number (e.g., driver’s license or passport)

Entities must also file updates within 30 days of any changes to the information previously submitted.

Penalties for Non-Compliance

Failure to comply with the CTA’s requirements could result in:

• Fines up to $500 per day for late filings.

• A maximum penalty of $10,000 per entity.

  

Temporary Relief: What the Federal Injunction Means

A Texas court issued a temporary restraining order on enforcement, meaning businesses are not required to file reports. However, this relief is temporary, and companies must monitor the situation closely to avoid falling behind when the injunction is lifted.

Next Steps for Small Business Owners

1. Educate Yourself: Review FinCEN’s official homepage and FAQs guidance.

   • Corporate Transparency Act Overview:

     • Corporate Transparency Act Fact Sheet

   • BOI Filing Portal:

     • FinCEN Beneficial Ownership Information Filing System

   • Frequently Asked Questions:

     • FinCEN BOI FAQs

   • Penalties and Compliance Guidance:

     • FinCEN Penalties Overview

2. Assess Your Reporting Obligation: Determine whether your business qualifies for an exemption (most small businesses will not).

3. Gather Documentation: Collect the required information about your entity and beneficial owners.

4. Stay Informed: Track updates on the court’s decision and FinCEN’s enforcement timeline.

Being proactive now can save your business significant headaches—and financial penalties—later. Don’t wait until the last minute to address these requirements.

For more information, visit FinCEN’s website or consult a compliance professional.