What California Business Owners need to know about the Corporate Transparency Act (CTA)
The new federal Corporate Transparency Act (CTA) went into effect on January 1, 2024. The CTA impacts many California businesses, and we want to share what you need to know – and do – to stay compliant with this new reporting process.
WHAT IS THE CORPORATE TRANSPARENCY ACT (CTA)?
The Corporate Transparency Act (CTA) is working to prevent money laundering or illegal activities under the guise of business ownership. This may sound stressful or daunting, but the CTA is simply reporting information you already have about your business and its ownership to a central database.
WHAT DO I NEED TO DO?
Under the Corporate Transparency Act (CTA), all existing reporting companies (i.e., businesses) formed before January 1, 2024, that do not qualify for an exemption must comply (by reporting) before the end of January 1, 2025. A reporting company created on or after January 1, 2024, and before January 1, 2025, must file a report within 90 calendar days of the date on which it receives actual or public notice that its creation has become effective.
Businesses that don’t report before the allotted time or that report false information will receive civil and criminal penalties, including a fine of up to $10,000 and/or imprisonment for up to two years.
Information about the business entity and,
Information about each person who, directly or indirectly, either exercises substantial control over the Company, or owns or controls at least 25 percent of its ownership interests (a “Beneficial Owner”)
IS MY BUSINESS EXEMPT?
There are 23 exemptions from FinCEN’s Report, which can be found online (here or here). The exemptions mostly focus on the following types of entities & organizations:
Those that are highly regulated by some government body (SEC, CFTC, OCC, FINRA, insurance, utilities),
Those that are tax-exempt (a 501(c)(3), 501(c)(4) organization), or
Large (i.e., 20 or more full-time employees plus $5,000,000 of revenue) or public companies.
WHAT INFORMATION DO I NEED TO PROVIDE?
If you do not qualify for an exemption, you will need to provide the following information to FinCen via your Report to comply with the Corporate Transparency Act (CTA):
The Company’s: (1) full legal name, (2) any trade or “doing business as” names, (3) complete current street address of the principal place of business, (4) jurisdiction of formation, and (5) taxpayer identification number; and
For each Beneficial Owner: (1) their full legal name, (2) date of birth, (3) complete current residential street address, (4) unique identifying number and the issuing jurisdiction from either a current (i) U.S. passport, (ii) state or local ID document, (iii) driver’s license, or (iv) if the individual has none of those, a foreign passport, and (5) an image of the document from which the unique identifying number was obtained.
Alternatively, a Beneficial Owner may apply for and receive a FinCEN identifier here, which reporting companies may report in place of the otherwise required four pieces of personal information about the individual in their Report.
WHERE DO I FILE MY REPORT?
If you are required to file a Report, you may do so here: https://boiefiling.fincen.gov/.
While you have the entire year to make a report, we are recommending our clients – and all non-exempt California businesses – do their reporting sooner rather than later!