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Businesses must now report their owners to remain legally compliant

On Behalf of | Jan 17, 2024 | Investigations & Regulatory Compliance

Compliance with both New York state and federal business laws is crucial for organizational success. Violations can lead to fines, reputation damage and even criminal charges against the executives who help operate the organization. The statutes that apply to businesses are in a constant state of flux. As new industries and technologies emerge, lawmakers revisit existing statutes to improve them and implement entirely new laws.

For example, in 2019, federal lawmakers drafted and passed the Corporate Transparency Act (CTA). The law took effect on January 1st, 2024. Existing companies and new businesses with opaque structures now have an obligation to file a report with the federal government about those involved in creating, running and financing the company.

Businesses must disclose those with a major interest

Under the CTA, organizations that already exist have until the beginning of 2025 to file their initial report disclosing those with a beneficial ownership interest (BOI) in the company. New companies started in 2024 or later must file appropriate paperwork with the Financial Crimes Enforcement Network (FinCEN) at the time of their formation.

The law requires the disclosure of any investor who holds a 25% interest in the company or more. The company must also identify those who play a significant role in organizational operations and those who either filed the paperwork to start the company or control the person filing that paperwork. Failing to comply with the CTA could lead to fines and possibly criminal allegations against the company.

Proactively tracking and complying with financial statutes can help businesses avoid potential legal complications in the future.