BBB Business Tip – Understanding the Corporate Transparency Act
Milwaukee, Wis. – The Corporate Transparency Act (CTA), enacted as part of the Anti-Money Laundering Act of 2020, introduces significant reporting requirements for many businesses in the United States. While aimed at increasing corporate transparency to combat financial crimes, the law also presents potential risks for scams and misinformation. Business owners, especially those managing limited liability companies (LLCs), must be prepared to meet these obligations and safeguard themselves against fraud.
Who does the Corporate Transparency Act apply to?
In light of a December 23, 2024, federal Court of Appeals decision, reporting companies, except as indicated below, are once again required to file beneficial ownership information with FinCEN. However, because the Department of the Treasury recognizes that reporting companies may need additional time to comply given the period when the preliminary injunction had been in effect, the Department of Treasury has extended the reporting deadline. Reporting companies that were created or registered prior to January 1, 2024, have until January 13, 2025, to file a Beneficial Ownership Information Report with the Financial Crimes Enforcement Network (FinCEN). This report discloses information about individuals who own or control the entity. Certain businesses that have been affected by recent natural disasters may not be required to file. For more information on, visit https://fincen.gov/boi.
Entities exempt from reporting include:
- Larger companies with more than 20 full-time employees and over $5 million in annual revenue.
- Certain regulated entities, like banks and insurance companies.
- Publicly traded companies.
Small businesses are the primary target of these new requirements, so it is critical to understand your responsibilities.
What business owners need to report
Each report must include:
- Identifying information about the entity, such as its legal name, address, and formation details.
- Details about beneficial owners, including names, birthdates, residential addresses, and unique identifying numbers from acceptable documents like a passport or driver’s license.
Failure to report or providing false information can result in civil and criminal penalties, including fines up to $500 per day of noncompliance and possible imprisonment.
Beware of scams and misinformation
With the introduction of new regulations, scammers may exploit confusion to target small business owners. Common tactics include:
- Fraudulent compliance services. Scammers might pose as official agencies offering to complete CTA filings for a fee.
- Phishing emails. Fraudsters could send emails impersonating FinCEN or other agencies, asking for sensitive information.
- Misinformation campaigns. Incorrect details about exemptions or deadlines may circulate, causing businesses to miss deadlines or fall prey to fraud.
How to stay informed and protected
- Use official sources. Ensure that you rely on government websites, such as FinCEN’s official site, for accurate information.
- Verify communications. Always double-check the sender’s credentials before sharing sensitive details. FinCEN does not request reports or fees via email.
- Consult trusted advisors. Work with your accountant, attorney, or business advisor to ensure compliance.
- Report scams. If you encounter suspicious activity, report it to your local BBB and the FTC.
For more information
Learn more about government impostor scams and how to avoid impostor scams.
See BBB’s scams HQ and BBB’s Business scams HQ for more alerts and tips to protect yourself, your loved ones, and your business.
Check out 10 steps to avoid scams.
To report a scam, visit BBB Scam Tracker.
For more information on business compliance, visit the U.S. Small Business Administration’s business guide on staying legally compliant and the FinCEN Small Business Compliance Guide.
View the online version
For more information or further inquiries, contact the Wisconsin BBB at www.bbb.org/wisconsin, 414-847-6000 or 1-800-273-1002. Consumers also can find more information about how to protect themselves from scams by following the Wisconsin BBB on Facebook, Twitter, Instagram and YouTube.
ABOUT BBB: The Better Business Bureau has empowered people to find businesses, brands, and charities they can trust for over 110 years. In 2023, people turned to BBB more than 218 million times for BBB Business Profiles on 5.3 million businesses, and 80,000 times for BBB charity reports on about 12,000 charities, for free at BBB.org. The International Association of Better Business Bureaus is the umbrella organization for the local, independent BBBs in the United States and Canada.
NOTE: This press release was submitted to Urban Milwaukee and was not written by an Urban Milwaukee writer. While it is believed to be reliable, Urban Milwaukee does not guarantee its accuracy or completeness.
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