Is Your Florida Small Business Ready for the Corporate Transparency Act?

In this blog, Amelia Beard explains the Federal Corporate Transparency Act and its effects on Florida businesses.

The Corporate Transparency Act (CTA) is a federal law that was enacted to prevent the use of anonymous shell companies for illicit activities such as money laundering and terrorism financing. It was signed into law on January 1, 2021, as part of the National Defense Authorization Act (“NDAA”). The CTA requires nearly all companies formed or licensed to operate in the United States to report information on their beneficial owners to the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of Treasury. For a company formed prior to January 1, 2024, its first reporting deadline is January 1, 2025, whereas a company created after January 1, 2024 will have 30 days after formation to file its report. Noncompliance will result in significant penalties and therefore, all private companies and their owners need to become familiar with their obligations under the CTA.

Which Companies Need to Report Under the Corporate Transparency Act?

The CTA applies to all “reporting companies” which are all entities that are created/formed by the filing of a document with a secretary of state or any similar state or tribal regulator office. There are exemptions, such as banks, publicly traded companies, and government authorities.

What Information Must Be Reported Under the Corporate Transparency Act?

Generally, entities that are subject to the CTA must report information on their “beneficial owners”, which includes any individual who directly or indirectly has substantial control over the entity or who owns or controls 25% or more of the ownership interests of the company. The company must also report information on each individual who directly filed documents that first formed the reporting company, which is referred to as the “company applicant.” The information that must be reported includes the name, date of birth, address, and identification number (such as a Social Security number or passport number) of each beneficial owner and company applicant.

What Are the Penalties for Non-compliance With the Corporate Transparency Act?

Any person who fails to file any of the required information or who willfully provides (or attempts to provide) false or misleading information in connection with any beneficial ownership report will face civil penalties of $500 a day while such violation continues, as well as be fined up to $10,000 or be imprisoned for up to two years (or both).

Conclusion

The Corporate Transparency Act aims to improve transparency and prevent financial crimes by requiring information on beneficial owners of companies. The imposition of this reporting requirement on a vast majority of small businesses places a burden on those entities to securely transfer and guard the “personally identifiable information” of each beneficial owner/company applicant. All businesses and their owners need to review the CTA requirements along with other federal/state regulations governing confidential information with an attorney to ensure compliance.

Amelia Beard is a Partner at Moorhead Law Group and the managing attorney of the firm’s Santa Rosa Beach, Florida Office. Amelia’s practice areas include real estate, probate, estate planning (wills & trust), and business law matters.