CLIENT NOTICES | For the latest client updates, including new Florida E-Verify obligations and client ERC claim information, please visit www.spli.com/clientnotices
Your Corporate Transparency Act 2024 Update: Exemptions & Penalties
January 10, 2024
The Corporate Transparency Act has implemented changes as of January 1, 2024, that your business should be aware of. This act is designed to combat money laundering efforts by requiring businesses to register with FinCEN, or the Financial Crimes Enforcement Network. Failing to comply with this act can come with serious penalties, but there are also exceptions to be aware of. Take a look at the most important information you need to know for your business.
For the most part, this act targets small businesses with no more than 20 employees. If your business has more, you likely do not have to worry about this. Keep in mind, however, that any business that drops to less than 20 employees will be required to make a filing in accordance with this act.
When filing, the company and all beneficial owners will need to provide relevant information. Beneficial owners are those who have "substantial control" over the company with strict ownership that is not less than 25% of the overall entity. Additionally, all existing companies that must file in accordance with this act will have until the end of 2024 to do so in order to remain compliant. Entities that are founded within the 2024 calendar year, however, only have 90 days to file starting from the official formation of the entity.
In an effort to make reporting more efficient, the act allows for several exceptions for businesses to be considered reporting entities. Specifically, there are 23 distinct exemptions to be aware of:
- Securities issuers
- Governmental entities
- Credit unions
- Money transmitting businesses
- Bank holding companies
- Securities brokers
- Exchange or clearing agencies
- Entities registered under the Securities Exchange Act
- Investment companies
- Venture capital advisers
- Insurance companies
- State-licensed insurance producers
- Entities registered with the Commodity Exchange Act
- Accounting firms
- Public Utilities
- Financial market utilities
- Pooled investment vehicles
- Tax-exempt entities
- Entities assisting tax-exempt entities
- Large operating companies (more than 20 full-time employees)
- Subsidiaries of exempt entities
- Inactive entities
Penalties for Noncompliance
If a non-exempt entity fails to comply with the requirements of the Corporate Transparency Act, it could potentially face serious penalties. Companies that fail to report accurately and on time can be hit with a $500 fine that applies every single day until the violation is fixed. That adds up fast, so it is always best to file correctly the first time.
In instances where entities willingly fail to file or provide correct information, the penalty can be significantly more severe. This kind of violation can come with a two-year prison sentence and a $10,000 fine. Note that these are the maximum penalties, so it is possible that some violators will only be hit with a fraction of that maximum penalty.
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user, or browser; we do not recommend or endorse the contents of the third-party sites.
Readers of this website should contact their attorney to obtain advice with respect to any particular legal matter. No reader, user, or browser of this site should act or refrain from acting on the basis of information on this site without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client relationship between the reader, user, or browser and website authors, contributors, contributing law firms, or committee members and their respective employers