With the close of summer, businesses across the United States are finally confronting the looming corporate disclosure requirements imposed by the Corporate Transparency Act (CTA) and the New York Corporate Transparency Act (NY CTA). These laws introduce stringent reporting obligations aimed at enhancing corporate ownership transparency and preventing money laundering, terrorism financing, and other illicit activities. The CTA and NY CTA require businesses to disclose their beneficial owners—individuals who own or control 25% or more of a company. With deadlines fast approaching, it is crucial for businesses to understand and meet these requirements despite ongoing legislative efforts to extend deadlines and ongoing legal challenges.
What You Need to Know:
- Deadlines are fast approaching for corporate disclosure requirements imposed by the Corporate Transparency Act (CTA) and the New York Corporate Transparency Act (NY CTA).
- Existing companies (formed before January 1, 2024) must submit their beneficial ownership reports by January 1, 2025 under the CTA.
- New companies (formed after January 1, 2024) are required to file their reports within 90 days of formation or registration under the CTA.
- Starting January 1, 2025, businesses operating in New York must disclose their beneficial ownership information to the New York Department of State.
Federal Corporate Transparency Act: Deadlines and Compliance
The Corporate Transparency Act (CTA), which took effect on January 1, 2024, requires most U.S.-based businesses—particularly corporations, limited liability companies (LLCs), and other similar entities—to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). This information includes names, addresses, dates of birth, and identification numbers (such as driver’s licenses or passports) of individuals who either own 25% or more of the entity or have substantial control over it.
Compliance Deadlines:
- Existing companies (formed before January 1, 2024) must submit their beneficial ownership reports by January 1, 2025.
- New companies (formed after January 1, 2024) are required to file their reports within 90 days of formation or registration. Starting January 1, 2025, new companies will need to file their reports within 30 days of formation or registration.
Failure to comply with these deadlines may result in civil penalties of up to $500 per day and criminal penalties of up to $10,000 and/or two years’ imprisonment. The law applies broadly, with exemptions for publicly traded companies, large operating entities (with more than 20 employees and $5 million in revenue), and certain regulated entities like banks and insurance companies.
New York Corporate Transparency Act: State-Level Reporting Requirements
In addition to the federal requirements, the New York Corporate Transparency Act (NY CTA) introduces state-specific reporting obligations. Starting January 1, 2025, businesses operating in New York—including corporations, LLCs, and other similar entities—must disclose their beneficial ownership information to the New York Department of State.
Key compliance deadlines under the NY CTA:
- Existing businesses must file their beneficial ownership reports by January 1, 2026.
- Newly formed or registered businesses must report their beneficial owners upon registration.
Like the federal CTA, the NY CTA applies to entities registered to do business in New York and imposes penalties for non-compliance. Certain entities, including publicly traded companies and regulated institutions, are exempt.
Legislative Efforts to Extend Deadlines and Constitutional Challenges
Despite these looming deadlines, there has been legislative activity aimed at extending the reporting timeline for the Corporate Transparency Act. Several bills have been introduced in Congress seeking to push back the compliance deadlines, citing concerns from small businesses and organizations that argue the time frame is too short for full compliance. Additionally, there have been constitutional challenges raised, particularly surrounding privacy and due process issues. Opponents argue that the reporting requirements could infringe on the privacy rights of business owners, and lawsuits have been filed in multiple jurisdictions challenging the validity of the law.
However, as of now, FinCEN has made it clear that the current deadlines remain in place. Businesses should not rely on the possibility of an extension or legal resolution and must move forward with preparing for compliance under the existing rules. Failure to meet the current deadlines could expose companies to significant fines and penalties.
Preparing for Compliance: Steps to Take Now
To ensure compliance with both the federal Corporate Transparency Act and the New York Corporate Transparency Act, businesses should take the following steps:
- Identify Beneficial Owners: Review ownership structures to determine who qualifies as a beneficial owner under the federal and state rules.
- Gather Required Information: Collect necessary information about beneficial owners, including full names, addresses, dates of birth, and valid identification numbers.
- Develop a Reporting Plan: Ensure that beneficial ownership reports are filed with FinCEN by January 1, 2025, for existing entities and within 30 days of formation for new businesses. For New York businesses, prepare to meet the January 1, 2026, deadline for state-level reporting.
