Most New Jersey business owners are probably aware of the Corporate Transparency Act (CTA). This is the law that requires that all owners report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).

Hypothetically, this law would make it harder to operate anonymous shell companies. Usually, federal reporting was reserved for large corporations, but the CTA impacts smaller companies as well.

Who is considered a beneficial owner?

A beneficial owner is anyone who controls at least 25% of the ownership interests. This can be through direct ownership (a co-owner) or indirect ownership – a contract, arrangement, etc.

There are some exceptions as to who is considered a beneficial owner. This includes minors, employees or creditors.

How do you report this information?

FinCEN collects names, addresses and other identifying information for each company’s beneficial owner that’s reported. This information will need to be updated with FinCEN annually after January 1, 2022.

In addition, business owners will have to report when their company was formed. There is some leniency on reporting all of this information for companies that were formed before CTA was passed, but they still will have to get these reports in within two years of the deadline.

What are the penalties?

Companies that don’t report this information – or report false information – might face fines and penalties. CTA violations may have a penalty of $500 for each day the violation continues or criminal fines up to $10,000.

Business owners can also go to jail for up to two years, depending on the severity of the CTA violation. Unauthorized disclosure of beneficial ownership information is also subject to penalties and imprisonment.

It can be overwhelming to suddenly have to report this information or change how your company is run. It’s important to seek outside help from a lawyer to make sure your company is in the clear and not committing any CTA violations.

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