A new federal law will take effect on January 1, 2024. This new law, the Corporate Transparency Act (CTA) shall impact many small business owners. It is an additional item of compliance for business owners who have LLCs, corporations, or other state-level registered entities. Here in Hawaii, if you registered your business entity with the DCCA BREG office, you may likely have to comply with CTA.
Compliance with CTA mandates the business owners disclose certain information to a federal agency. Many small business owners are unaware there is a reporting requirement. They may be unsure if CTA even applies to them.
Under the CTA, certain business owners will have to disclose beneficial ownership information, which may include owners who have “control” over their business entities. Business entities that must report are called “reporting companies.” Someone on behalf of a reporting company must gather the beneficial ownership information. They will then file and upload a beneficial ownership information report to the Financial Crimes Enforcement Network (FinCEN).
Small Business Owners May be Confused by CTA’s Forced Compliance
Business owners may be confused they must comply even if they’ve committed no crime. However, the CTA is designed to prevent money laundering. This is the reason for forcing these information disclosures. Business owners that fail to comply may be see fines and penalties, even jail time. There are some exemptions to complying with the law, but those mainly apply to regulated industries or large operating companies.
For business owners that are unsure of the need to comply with CTA it is best to speak to your business attorney and seek advice about what information needs to be prepared. Additionally, business entities with multiple owners may need update their governance documents, such as Operating Agreements for LLCs.
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As always, you should speak to an attorney regarding your compliance with a law if you are unsure.