What is the FinCEN Corporate Transparency Act and how will it affect your business?

Meili Bell

Updated: Jan 16, 2024 · 4 min read

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You may have heard about something called the Corporate Transparency Act (previously the Beneficial Ownership Rule) recently. Since it was announced, this new rule has caused some buzz among the small business community as people scramble to understand what it means for their businesses.

In this article you’ll find everything you need to know about:

  • Who created the new Corporate Transparency Act
  • The purpose behind this rule
  • What the Corporate Transparency Act requires of small business owners like yourself

You’ll also receive a free resource from the legal experts at SixFifty to reveal exactly what steps you need to take when this rule takes effect. But before you can prepare, you need to know what you’re dealing with. Keep reading to uncover the details of the Corporate Transparency Act.

Who is behind the Corporate Transparency Act?

The Corporate Transparency Act Is mandated by The Financial Crimes Enforcement Network (FinCEN), which is a bureau of the U.S. Department of the Treasury.

Since it was established in 1990, FinCEN’s purpose has been to combat financial crimes such as money laundering. More specifically, the bureau’s mission is to “safeguard the financial system from illicit use, and to promote national security through the collection, analysis, and dissemination of financial intelligence.”

FinCEN plays a critical role in ensuring the integrity of the US financial system and protecting it from abuse by criminals and terrorists.

What is the FinCEN Corporate Transparency Act?

The new FinCEN Corporate Transparency Act requires qualifying companies to file a federal report to identify its beneficial owners. By identifying beneficial owners, FinCEN will be able to weed out shell companies used for money laundering.

A beneficial owner is “any individual who, directly or indirectly, either exercises substantial control over such reporting company or owns or controls at least 25 percent of the ownership interests of such reporting company.” Meaning, anyone who owns or controls the company must be listed.

If you have beneficial owners to report, then you’ll have to do so in 2024. FinCEN recently published its final regulations on the Corporate Transparency Act, and the requirements will go into effect on January 1, 2024. Companies will have one year to file their initial reports after the FinCEN Corporate Transparency Act’s’s effective date, so reports for these companies will be due on January 1, 2025. However, new companies that are created or registered after January 1, 2024 will have 30 days to report.

FinCEN estimates that the number of current US businesses that will need to report is in the tens of millions. Does this include you? Most of the affected organizations will be small and midsize businesses, and failure to comply with these new regulations may result in civil or even criminal penalties. But there are some exemptions to be aware of.

Exceptions to the rule

In general, corporations and limited liability companies (LLCs) will be required to file a report unless an exemption applies — and there are 23 categories of exemptions.Exempt companies generally fall into a category of businesses that are already federally regulated, like banks, credit unions and venture capitalists. “Large operating companies” are also exempt. These are entities that employ more than 20 full-time employees in the United States, have a physical office in the U.S. and have more than $5 million in gross sales.

With 23 categories of exemptions, how are businesses to know whether they need to file a report? Good question! Expert help can put your mind at ease and make sure your business is in compliance by the 2025 deadline.

How SixFifty can help with the FinCEN Corporate Transparency Act

The legal experts at SixFifty have created a FinCEN Corporate Transparency Act Worksheet to help you determine whether your business needs to comply with the FinCEN Corporate Transparency Act. This tool will walk you through a series of questions about your business just like a lawyer would. It then maps your answers onto the FinCEN framework to let you know if you need to report your ownership structure.

The end product is a document that shows you took the obligation seriously, whether you need to comply or not. You should print, sign and retain the completed worksheet for record-keeping purposes. Showing that you tried in good faith to determine if you needed to comply can help you avoid serious fines and penalties.

Make sure you’re ready by downloading the FinCEN Corporate Transparency Act Worksheet today from the SixFifty Marketplace.

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