The Corporate Transparency Act (CTA) is a federal law that requires U.S. businesses to report their beneficial ownership information to FinCEN, a bureau of the U.S. Treasury Department. On top of introducing a new compliance requirement, the CTA also comes with strict penalties for businesses that don’t comply with the reporting rules.
This article breaks down the penalties for violating the Corporate Transparency Act and how your business can avoid them.
What Is The CTA and BOIR?
The Corporate Transparency Act (CTA) is a federal law in the U.S. that mandates companies to reveal certain ownership details to the government. Specifically, it requires U.S. companies to submit Beneficial Ownership Information Reports (BOIR) to the Financial Crimes Enforcement Network (FinCEN).
BOI Reports demand personal details about a company’s beneficial owners and the company applicants. These reports give FinCEN a clear view of the key individuals associated with a legal entity.
The CTA and BOIR affect most LLCs and corporations in the U.S. Any entity formed by filing with a Secretary of State’s office in the U.S. is a “reporting company” and must file BOIR with FinCEN.
What Are The Penalties For Violating the CTA?
FinCEN is key in enforcing the Corporate Transparency Act (CTA). FinCEN has the power to impose civil and criminal penalties on business owners who fail to comply with the BOIR requirements. These penalties are significant and aim to make sure companies are diligent about their reporting.
Here’s a breakdown of the penalties can face for violating the Corporate Transparency Act:
Civil Penalties for Reporting Violations: $500 Daily Fines
FinCEN imposes civil penalties for simple reporting violations. These can include fines up to $500 per day for each violation.
These violations typically involve filing the Beneficial Ownership Information (BOI) Report late or submitting incorrect information.
Additionally, business owners face civil fines if they do not update FinCEN whenever their company’s beneficial ownership information changes.
Criminal Penalties; $10,000 Fines and Jail Time
FinCEN can charge business owners and senior officers with criminal penalties if they willfully fail to comply with the CTA’s reporting requirements. Criminal penalties can include up to a $10,000 fine and two years in prison.
Criminal penalties apply to companies that knowingly fail or outright refuse to file a BOI Report with FinCEN. They also apply to individuals who provide false information or deliberately lie in the BOI Report.
Who Do Penalties Apply To?
The Corporate Transparency Act gives FinCEN the power to charge a wide range of individuals with civil and criminal penalties if a company fails to meet the BOIR requirements. Penalties can apply to all of a company’s beneficial owners and senior officers, or anyone responsible for filing a business’s BOI Report.
FinCEN is not limited to charging just individuals within the company for reporting violations. Anyone who causes a reporting company to miss filing deadlines or neglect its reporting obligations can be held responsible and face both civil and criminal charges.
Top Tips for Complying With the CTA
Here are our essential tips to help your business steer clear of violations under the Corporate Transparency Act and avoid penalties:
Tip #1 File the Initial BOI Report On Time
The easiest way to avoid fines from FinCEN is simply to file BOI Reports on time. This goes for the initial report, and any future updated reports or corrections.
FinCEN allows business owners to correct mistakes or errors that might lead to fines by filing Corrected BOI Reports. But remember, you have only 30 days to submit a corrected report after finding an error.
Tip #2 Keep Records of Reports
It’s crucial to keep complete records of any BOI Reports you submit for your company. This includes recording the date the report was submitted and keeping copies of all the information that was included.
For small and medium-sized businesses, setting up a records management system could be a smart move to help track reports and BOIR information efficiently.
CTAboi.com offers BOI Reporting Tool that gives you a custom dashboard for managing your company’s reports.
Tip #3 Monitor Changes in Information
Check in with your company’s beneficial owners frequently so you can spot changes in information that would require an updated report.
You need to submit an Updated BOI Report any time a beneficial owner changes their address or receives a new ID number.
You will also need to file updates if the company information changes. For example, if the company changes its principal office address in the U.S., or there’s a change in ownership in management.
Tip #4 Appoint a Compliance Officer
Larger businesses with multiple beneficial owners may benefit from appointing a dedicated compliance officer to manage BOI Reporting.
A compliance officer can help ensure that the company’s Initial BOI Report is submitted correctly and that it contains all the required information. They can also communicate with the company’s beneficial owners to keep track of changes, and submit updated reports to FinCEN as needed.
Tip #5 Get Help From An Expert
Understanding the Corporate Transparency Act and BOIR can be challenging to do on your own. Contact the professionals at CTAboi.com for help with meeting all reporting needs and avoiding fines.