The Corporate Transparency Act (CTA), enacted as part of the Anti-Money Laundering Act of 2020, represents one of the most significant changes in corporate law in decades. With its full implementation set for 2024, businesses in Florida and across the United States are now subject to new and strict reporting requirements. The CTA’s aim is to curb illegal activities like money laundering, terrorism financing, and tax evasion by increasing transparency within corporate entities. However, as with any major regulatory change, the consequences of non-compliance can be severe.
Let’s take a look at how the CTA operates, who and what must be reported, and what to do if you miss your deadline.
Overview of the Corporate Transparency Act (CTA)
The CTA mandates that a large portion of business entities in the United States report beneficial ownership information (BOI) to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). These requirements are intended to establish a registry of who actually owns and controls corporate entities, to close loopholes that have historically been exploited for illicit purposes.
Who Must Report Under the CTA?
Under the CTA, most domestic and foreign corporations, LLCs, and other similar entities that are registered to do business in the U.S. must report beneficial ownership information. This includes entities formed in Florida, making the legislation particularly relevant to the state’s large population of small businesses, LLCs, and investment companies.
What Must Be Reported?
The information required under the CTA includes:
- Full legal names of beneficial owners.
- Date of birth.
- Current residential or business address.
- Unique identifying numbers from acceptable identification documents, such as passports or state-issued driver's licenses.
- NOTE: the incorporator’s information must also be reported. This can easily be overlooked so be careful not to make a costly oversight.
Filing Deadlines for CTA Compliance
New entities formed after January 1, 2024, are required to submit their beneficial ownership reports to FinCEN within 30 days of formation. For entities formed prior to 2024, they must file their reports within one year, by January 1, 2025.
Consequences of Failing to Comply with the CTA
Non-compliance with the CTA can lead to serious legal and financial penalties, including:
- Financial Penalties
Failure to comply with the CTA’s reporting requirements can lead to substantial fines. The financial penalties for not adhering to the CTA are steep:
Civil penalties can reach up to $500 per day for each day the violation continues.
Criminal penalties can include fines up to $10,000 for willful violations.
Given that some companies might inadvertently fail to file their BOI reports, these fines could accumulate quickly if the oversight is not promptly corrected.
- Criminal Penalties
In addition to financial penalties, willful non-compliance with the CTA can result in criminal charges. Individuals responsible for submitting the BOI information can face:
Criminal fines of up to $10,000.
Imprisonment for up to two years.
This level of penalty illustrates the government’s intent to treat the CTA seriously, aiming to deter intentional efforts to conceal ownership information. Business owners in Florida should be particularly aware that claiming ignorance or misunderstanding of the law will not necessarily shield them from these criminal penalties.
- Business and Reputational Damage
Beyond financial and criminal penalties, businesses that fail to comply with the CTA may suffer significant reputational damage. Non-compliance could raise red flags with regulators and financial institutions, making it difficult for the business to secure loans, attract investors, or engage in transactions with other entities wary of working with a non-compliant company. In Florida, where business networking is often community-driven, this reputational hit can have long-lasting impacts.
Furthermore, regulatory non-compliance could lead to increased scrutiny from the IRS and other government agencies, which may result in additional audits or investigations.
Steps to Take if You Have Missed Your CTA Filing Deadlines
While missing your CTA filing deadlines can result in severe consequences, all is not lost. There are actions you can take to remedy the situation and mitigate potential penalties.
- Determine Whether Your Business is Subject to CTA Reporting
Not every entity is required to report under the CTA. The first step in addressing missed filing deadlines is determining whether your business falls under the reporting requirements. Certain entities are exempt from the CTA, including:
Large operating companies (those with over 20 full-time employees, over $5 million in gross receipts or sales, and a physical office in the U.S.).
Regulated entities, such as publicly traded companies, banks, credit unions, and investment advisors.
Tax-exempt organizations.
If your business is exempt, you may not need to file at all. However, it is crucial to make this determination quickly with the assistance of legal counsel.
- Contact an Attorney for Guidance
Florida businesses that miss the CTA filing deadlines should seek legal guidance immediately. An attorney who specializes in corporate compliance or business law can help you assess the extent of your non-compliance and guide you through the steps needed to rectify the situation.
Your attorney can assist in:
Preparing the necessary BOI reports.
Communicating with FinCEN to explain the delay.
Negotiating any potential reduction in penalties, particularly if the non-compliance was due to an unintentional oversight.
Given the complexities of the CTA and the potential for criminal charges, having legal representation ensures that your business can respond appropriately and minimize its risk.
- File Your Report as Soon as Possible
Even if you have missed your filing deadline, it is critical to file the required information with FinCEN as soon as possible. The longer you wait, the higher the risk of accumulating daily fines.
Businesses can submit their beneficial ownership reports through FinCEN’s online portal. While doing so, it may be necessary to include an explanation for the delay in the filing, especially if you are submitting the report significantly after the deadline. FinCEN is likely to be more lenient in cases where businesses voluntarily report their information, rather than waiting for FinCEN to initiate enforcement actions.
- Consider Requesting Penalty Relief
In cases where the missed filing was not due to willful neglect, it may be possible to request penalty relief from FinCEN. You or your attorney can submit a letter explaining the circumstances that led to the missed deadline and requesting a reduction or elimination of the fines.
FinCEN has discretion in determining whether to grant penalty relief, and while they are under no obligation to do so, businesses that act in good faith and promptly correct their mistakes may have a better chance of securing leniency.
- Develop an Ongoing Compliance Strategy
After addressing the immediate consequences of missing a CTA deadline, it is essential to develop an ongoing compliance strategy to ensure that your business remains in good standing with future CTA requirements. This includes:
Keeping accurate and up-to-date records of your beneficial owners.
Regularly reviewing any changes to ownership or control within your company and filing updated BOI reports as necessary.
Implementing internal processes to ensure timely compliance with future reporting deadlines.
Partnering with a legal professional or compliance advisor can help ensure that your business stays on top of its CTA obligations moving forward, reducing the risk of future penalties.
Conclusion
The CTA represents a major shift in the way businesses operate and report information. Non-compliance with the CTA can result in steep financial penalties, criminal charges, and reputational damage. Florida businesses, particularly those that operate as LLCs or small corporations, must pay careful attention to these new requirements.
If you have missed your CTA filing deadline, it is imperative to act quickly. By consulting with legal counsel, submitting your BOI report, and requesting penalty relief if applicable, you can mitigate the negative consequences and ensure your business remains compliant. Going forward, businesses should take proactive steps to stay updated on their reporting obligations and avoid the costly consequences of non-compliance.
In a state like Florida, where the economy thrives on entrepreneurship and corporate growth, adhering to the CTA is not just a legal necessity but a critical aspect of sustaining business integrity and success. If you have questions about the CTA, contact the Business lawyers at MSD Business today for a free consultation.
About the Author:
Chase Carpenter is a partner in the Business Division of Law Offices of Moffa, Sutton, & Donnini, P.A. His practice revolves around business transactions and business litigation. Mr. Carpenter handles a wide range of cases including contract drafting, partnership disputes, commercial leases, and construction litigation. These cases encompass diverse industries, including healthcare, technology, real estate investment, and government contracting. You can learn more about Mr. Carpenter in his firm bio HERE and you can call him directly at 813.515.9392.
About the Firm:
The Law Offices of Moffa, Sutton, & Donnini, P.A., also known as MSD Business, is a local business law firm in Tampa, FL, serving clients throughout Tampa Bay and statewide. Our firm has a long history of helping clients navigate all types of complex legal matters, including local and state tax issues. In our business law practice, we assist clients with everything from mergers and acquisitions to contract disputes, business litigation, general counsel, and more. Contact us for a FREE INITIAL CONSULTATION to confidentially discuss how we can help.