A new federal law requires special filings from certain businesses

On Behalf of | Feb 22, 2024 | Business Law |

Those operating successful businesses in California generally understand the importance of statutory compliance. Regulatory infractions can cost a business its license to operate lead to financial penalties and potentially trigger criminal charges in more extreme cases. Whether a business owner operates a small professional practice as an outside information security consultant or owns a restaurant, they need to make every reasonable effort to consistently comply with federal and California state laws.

There are some laws that only apply to those operating businesses in certain injury industries and other laws that only apply to certain types of businesses. For example, a new federal law that took effect on January 1st, 2024 could have implications for those operating corporations, limited liability companies (LLCs) and other businesses with opaque ownership structures.

The Corporate Transparency Act requires a special report

Lawmakers constantly adjust existing statutes and pass new laws to counter financial misconduct and other types of crime. The Corporate Transparency Act (CTA) exists to counter both money laundering and schemes to provide financing for terrorist organizations.

The CTA requires that businesses that do not have clear records of their owners publicly available file a special report with federal authorities disclosing who started the company and who has made major investments in the organization. The CTA requires a report providing identifying information for everyone who has a beneficial ownership interest (BOI) in the organization.

Someone who owns at least 25% of the company must disclose their identity under the CTA. Organizations also have to declare who filed the paperwork to start the business. In theory, the law could help connect seemingly unrelated businesses by identifying parties who have an interest in multiple companies. That could then make it easier for the government to track money laundering or other types of financial misconduct.

Successful companies in California might be at risk of fines and other penalties if they fail to submit the necessary reports to the Financial Crimes Enforcement Network (FinCEN) before the beginning of 2025. Those starting new businesses need to file a report with FinCEN as part of the startup process.

Learning about and complying with changing federal business statutes is important for the protection of successful California businesses. Seeking personalized legal guidance is always an option in this regard.