June 2023: Small Business Owners Alert: the Corporate Transparency Act Is Coming
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On January 1, 2024, the Corporate Transparency Act, known as the CTA, goes into effect. The CTA is a federal law that will require millions of small businesses across the country to file reports with the federal government. Under the CTA, a small business is any company that has 20 or fewer employees, or $5 million or less in gross receipts or sales in the prior fiscal year.
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These small businesses will have to report information about the company itself, as well as personal information about each of its "beneficial owners." The company information that must be reported includes its full legal name, any trade name or "doing business as" name, and its business address. The personal information that must be reported includes each owner's full legal name, date of birth, current residential or business address, and passport or state driver's license number.
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If any of this information changes after January 1, 2024, an updated report must be filed. So if a company gets new owners for whatever reason after that date, it must file an updated report.
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For small businesses created before January 1, 2024, the initial report must be filed by January 1, 2025. So pre-existing companies have all of 2024 to submit their initial report.
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On the other hand, for small businesses created after January 1, 2024, the initial report must be filed within 90 days of the date the company is formed. So any post-January 1, 2024 companies have only 90 days to submit their initial report.
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Given these differing timelines, it may make the most sense for someone considering whether to incorporate a small business, to create a new entity, or to make other changes to company structure to do so before January 1, 2024. That way, the small business and its beneficial owners will have all of 2024 to collect the information and submit the initial CTA report.
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Whatever your situation, if you're a small business subject to the CTA, this new law will be in effect and apply to you before you know it. Contact the Barron Law Office now to discuss how best to prepare for and comply with the new CTA.
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