Small business in Minnesota are impacted by the Corporate Transparency Act (the “CTA”). If you are unaware of this new set of rules, it was enacted by Congress as part of its on-going effort to combat terrorism, organized crime, and money-laundering.
As distant as these issues might appear, this new rule set impacts small and large biz. For businesses owned by military veterans, this new rule impacts them too. Whether the business is domiciled in Minnesota or otherwise, this rule demands planning from business owners.
Corporate Transparency Act Requirements
The CTA requires certain entities (called “reporting companies”) to report information about the companies themselves,. Their beneficial owners and company applicants (the persons who signed the formation documents for the entity) are impacted. As a sidebar, this will further increase proxy agents and the fees they charge.
Back on point, this rule set is so overly broad, that it impacts big and small companies. This includes mom and pop shops. I share your frustration. Nonetheless, it is vital to understand that failing to meet CTA requirements may result in severe penalties. This can be planned for and avoided. But, failing to accurately and timely filing their required reports may initiate audits and other efforts.
Business owners can file reports online using the system created by Financial Crimes Enforcement Network (“FinCEN”). FinCEN is a department of the United States Treasury.
Reporting Deadlines for the CTA
The first issue is determining when the entity or business was created. The CTA looks at whether the small business or large business started on or before December 31, 2023. Reporting for these entities are delayed until January 1, 2025.
However, entities formed on or after January 1, 2024 are subject to these rules. In other words, the Corporate Transparency Act requires “new” businesses to report under a tighter deadline. Under a revised rule issued November 29, 2023, FinCEN extended the deadline for entities created in 2024 ONLY to no later than 90 days after the entity is formed, instead of the original 30 days.
For new entities created on or after January 1, 2025, the reporting deadline will be no later than 30 days after the entity is formed.
Even with an extension in 2024, this may be a very short time to gather all the required information. So, it will be important for those who are forming entities beginning in 2024 to start gathering required information. Ideally, gathering information before the entity is created.
While it is acknowledged that several professional organizations have petitioned Congress to delay implementation of the CTA, business owners should not defer preparation for the CTA, banking on a delay being granted.
