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CTA Compliance Checklist

Corporate Transparency Act checklist for small businesses

CTA Compliance Checklist

Preparation for Compliance with the Corporate Transparency Act (CTA) - Effective January 1, 2024

As of January 1, 2024, a new mandate under the Corporate Transparency Act (CTA) requires over 32 million entities, predominantly small businesses, to submit a Beneficial Ownership Information (BOI) report to the Financial Crimes Enforcement Network (FinCEN). Non-compliance with this federal law can lead to a civil penalty of $500 per day, escalating to criminal penalties of up to $10,000 and up to two years of imprisonment for continued violations.

With the January 1 deadline rapidly approaching, it is imperative for small business owners to begin their preparation.

Step 1 of 7

Are you required to submit a BOI Form?

Your Next Step:

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Step 1: Determine the Applicability for BOI Report Filing

  • Assess your business’s entity type (LLC, corporation, limited partnership, etc.) to ascertain the filing requirement.
  • Understand that LLCs and corporations are generally obligated to file a BOI report, barring specific exemptions.
  • For entities other than LLCs or corporations, evaluate whether you need to file a BOI report based on FinCEN’s definitions and guidance. Seek legal counsel if necessary.

Step 2: Evaluate Potential Exemptions

  • Investigate if your business qualifies as a “large operating company” or an “inactive entity” for exemption.
  • Review other possible exemptions and consider professional legal advice for clarity.

Step 3: Preparations for Filing a BOI Report

  • Identify the beneficial owners of your business.
  • If the criteria for beneficial ownership are unclear, seek legal advice.
  • Notify each beneficial owner about the CTA’s requirement to report their personal data to FinCEN.
  • Choose between obtaining the information directly from beneficial owners or applying for a FinCEN Identifier.
  • Gather and update the necessary information for the initial BOI report.

Step 4: Establish an Ongoing Information Update Procedure

  • Ensure the data is current for the initial filing and for subsequent required updates.
  • Consider implementing an entity management system for efficiency.
  • Prioritize secure storage of personal information.

Step 5: Plan the Submission of Your Initial BOI Report

  • Decide on the timing of your filing within the one-year window starting January 1, 2024.
  • Determine whether to file independently or seek assistance from a third-party service provider.

Step 6: Duplicate the Process for Each Business Entity You Own

  • Replicate steps 1 through 5 for each business entity under your ownership to ensure comprehensive compliance.

Additional Considerations for Enhanced Compliance Strategy

  • Entity Evaluation: Assess the necessity of maintaining existing entities. Contemplate the dissolution of entities that are redundant or inactive to streamline your corporate structure.
  • Strategic Entity Formation: If you are contemplating the establishment of a new entity, evaluate the benefits of forming it prior to January 1, 2024. This timing would categorize it as an existing entity under the new law, potentially allowing for an extended timeframe for BOI report filing.
  • Governance Documentation Update: Review and, if necessary, revise your governing documents, such as operating agreements or shareholder agreements, to incorporate provisions about the obligations of beneficial owners in providing personal information as required under the CTA.

Preparation for Beneficial Ownership Information Reporting:

The effective date for BOI reporting under the Corporate Transparency Act is fast approaching. Utilize this comprehensive checklist as a guide to ensure your business is fully prepared and compliant with the new regulatory requirements.