The Corporate Transparency Act (CTA) Small Entity Compliance rules were finalized by the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) in September 2022. The rules are set up to combat money laundering, financing of terrorism and other fraudulent activities.

Companies that are subject to the rules have to report:

• Company information, including name and taxpayer information.
• Beneficial owner information, including the full legal name, date of birth, address including a state or federal issued ID, such as a US passport or state driver’s license.

The rules take effect January 1, 2024, and require companies formed after January 1, 2024 to file within 30 days of incorporation. Existing companies have until January 1, 2025, to submit the required information. The report is filed only one time unless there is a change of ownership of the company.

Generally, most small businesses are required to file, but there are 23 exemptions to the rules. FinCEN Section 1.2 of the Small Entity Compliance Guide has a full list of the exemptions.

Some of the key exemptions include:

• Large companies, which are defined as companies with 20 full-time employees and more than $5,000,000 in gross receipts or sales.
• Public companies
• Certain types of regulated entities, such as insurance companies, banks and credit unions, security and money services businesses.
• Investment companies, investment advisers and venture capital fund advisers.
• Subsidiaries of certain exempt entities, including larger operating companies, public companies, regulated entities such as banks

Failure to report complete or updated beneficial ownership may result in civil or criminal penalties, including up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000.