The Corporate Transparency Act (CTA) is groundbreaking legislation that seeks to combat financial crimes by requiring companies to disclose information regarding their owners. This legislation impacts millions of small businesses across the U.S., including many in Alabama, and introduces new reporting requirements that every business owner should understand.
What is the Corporate Transparency Act?
The Corporate Transparency Act seeks to increase financial transparency by preventing criminals from using anonymous entities for illegal activities such as money laundering, fraud, or tax evasion. Implemented by the Financial Crimes Enforcement Network (FinCEN), the law requires businesses to report specific details about their beneficial owners–individuals with 25% or more control or ownership stakes.
Due to the sensitivity of the information, this information will be stored in a secure database accessible to law enforcement and other authorized government entities. The data is not available to the public, ensuring privacy while promoting accountability.
Who Needs to Report in Alabama?
Most small businesses in Alabama must comply with the CTA, particularly LLCs, corporations, and other entities registered with the state. However, there are certain exemptions:
- Larger companies: Businesses with more than 20 full-time employees, over $5 million in annual revenue, and a physical U.S. office are exempt.
- Heavily regulated entities: Banks, credit unions, and other institutions already subject to federal oversight do not need to file reports.
If your Alabama business doesn’t fall into these exemption categories, you must submit the required information by the deadline.
What Information Must be Reported?
Businesses subject to the CTA must file details about their beneficial owners including:
- Full legal name
- Date of birth
- Residential or business address
- An identifying document number (driver’s license, passport, etc.)
This information must be provided during registration for companies formed on or after January 1, 2024. Existing companies have until January 1, 2025, to comply.
Why Does the CTA Matter for Alabama Businesses?
While the purpose of the CTA is to curb illegal activities, it introduces some challenges for small business owners. Understanding the law and preparing your business to meet the requirements is essential for avoiding penalties, which can include:
- Civil fines of up to $500 per day for non-compliance.
- Criminal penalties include fines of up to $10,000 or imprisonment for severe violations.
Implementation of the CTA underscores the importance of transparency and could lead to additional recordkeeping for small businesses.
Steps Alabama Businesses Should Take
To stay ahead of the CTA requirements, Alabama business owners should take these key steps:
- Identify Beneficial Owners: Review your company’s structure to find all individuals who meet the definition of a beneficial owner under the CTA.
- Prepare to File: Ensure you have accurate information that is up to date on all beneficial owners. This includes keeping copies of relevant documents like driver’s licenses or passports.
- Monitor Changes: Beneficial ownership can change, and the CTA requires updates to be reported within 30 days. Staying on top of these changes is critical to maintaining adherence.
- Consult Legal Experts: Alabama’s corporate law attorneys, such as those who specialize in small business compliance, can provide you with the guidance needed to ensure your company meets its obligations.
Understanding the Corporate Transparency Act with Muncie, Mattson, & Gunter
The experienced attorneys at Muncie, Mattson, & Gunter provide knowledgeable and valuable advice to business owners and those looking to start a company of their own in Alabama. Our corporate practice includes the formation of various corporate entities including LLCs, Corporations, and Nonprofits. We also prepare corporate buy/sell agreements and provide contract analysis, as well as advice on business structuring.
If you are looking for an experienced Alabama law firm that you can trust to help you navigate the Corporate Transparency Act, look no further than Muncie, Mattson, & Gunter, Attorneys at Law. Contact us today for more information about our Alabama business formation services and expertise, or give us a call to get started!