The Corporate Transparency Act 2024 has introduced significant changes to regulations affecting small businesses in the United States. This law aims to increase transparency in ownership and control of businesses while combating money laundering and tax evasion. With the implementation of this law, it is essential for small business owners to understand its implications and prepare to comply with the new requirements. Below, we explore the most relevant changes and what small businesses need to do about them.
1. Definition of “Beneficial Owners”
One of the key aspects of the Corporate Transparency Act is the definition of “beneficial owners.” According to the law, a beneficial owner is any individual who owns or controls, directly or indirectly, at least 25% of an entity. This includes individuals who have the ability to influence the management or decisions of the business. Small businesses must identify their beneficial owners and ensure that this information is up-to-date in their corporate records. This involves:
- Documenting Ownership: Maintaining accurate records of who owns and controls the business, including all relevant partners and shareholders.
- Updating Information: Businesses must ensure that any changes in ownership are promptly reflected in their records and communicated to the appropriate authorities.
2. Reporting Requirements for New and Existing Entities
Small businesses registered as corporations or limited liability companies will be required to comply with new reporting requirements. The law mandates that entities submit information about their beneficial owners at the time of formation and at certain intervals. These reporting requirements include:
- Annual Information Submission: Businesses must submit an annual report that includes the identification of their beneficial owners and any changes in the ownership structure.
- Filing Deadlines: It is crucial for small businesses to familiarize themselves with the established deadlines for submitting this information, as non-compliance may result in significant penalties.
3. Protection of Beneficial Owners’ Privacy
The Corporate Transparency Act also stipulates that information about beneficial owners will be confidential and only accessible to certain government agencies and law enforcement. This is a relief for small businesses, as it allows them to comply with the law without publicly disclosing their owners’ information. Businesses should ensure to:
- Implement Security Measures: Adopt practices to protect the confidential information of beneficial owners and ensure it is shared only with authorized entities.
- Maintain Secure Internal Records: Ensure that information about beneficial owners is stored securely and accessible only to authorized personnel.
4. Penalties for Non-Compliance
The Corporate Transparency Act imposes significant penalties for businesses that fail to comply with reporting requirements. These penalties may include severe fines and, in some cases, prison sentences for those responsible. To avoid these consequences, small businesses must:
- Take Compliance Seriously: Non-compliance can result not only in financial penalties but also in damage to the company’s reputation.
- Consult with a Lawyer: It is advisable for small businesses to seek legal advice to ensure they are meeting all the requirements set forth by the law.
5. Impact on Business Structure
With the implementation of the Corporate Transparency Act, some small businesses may need to reconsider their organizational structure. This could include:
- Restructuring: Some businesses may choose to change their legal structure to better comply with the new requirements, which could involve transitioning from an LLC structure to a corporation or vice versa.
- Ownership Assessment: Small businesses should evaluate who their owners are and how this may affect their compliance with the law.
The Corporate Transparency Act brings significant changes for small businesses, and understanding these changes is crucial for their ongoing operation. By taking proactive steps to comply with the new requirements, businesses will not only avoid penalties but also contribute to a more transparent and accountable business environment.
Need Legal Help to Comply with the New Law?
If your small business needs guidance on how to comply with the Corporate Transparency Act or any other regulation, we are here to help. At Jurado & Associates, P.A., we have a team of specialized attorneys ready to support you. Call us at +1 (305) 921-0976, message us via WhatsApp at +1 (305) 921-0976, or send us an email at [email protected]. Letās ensure your business is in compliance with the law.
