Note: On March 2, 2025, the U.S. Department of Treasury announced that it will not enforce any penalties or fines associated with the beneficial ownership information under the Corporate Transparency Act against U.S. citizens or domestic reporting companies after the rule takes effect. The rule will still take effect, but it only applies to foreign reporting companies, as of now.
Do you own a Single-Member LLC? If so, you need understand your obligations under the Corporate Transparency Act.
The Corporate Transparency Act (CTA), which was passed in 2021, is a new federal law that aims to crack down on anonymous shell companies used for illicit financial activities. While the CTA is primarily targeted at larger, more complex corporate structures, it will also impact smaller businesses like single-member limited liability companies (LLCs), limited partnerships and corporations. A lot of individuals have set up a single-member LLC at some point if they have or had a consulting or service business or if they have a rental property (s).
If you own a single-member LLC, here’s what you need to know about the CTAs reporting requirements:
Beneficial Ownership Reporting
The core of the CTA is a new requirement for companies to report their “beneficial owners” to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. A beneficial owner is generally defined as any individual who owns or controls at least 25% of the equity interests of a company.
For a single-member LLC, this means you will need to report your own information as the sole beneficial owner. This includes your full legal name, date of birth, residential address, and a unique identifying number like a passport or driver’s license.
In addition, you will need to report the LLCs full legal name, any trade name or DBA (doing business as), principal place of business address (no PO boxes or c/o), jurisdiction of formation and taxpayer ID number.
The reporting deadline for existing LLCs has been extended to March 21, 2025. New LLCs formed after February 18, 2025 will need to file the beneficial ownership report within thirty (30) days of their date of formation.
Ongoing Reporting Requirements
In addition to the initial beneficial ownership report, the CTA also requires LLCs to report changes to the organization’s information or their beneficial ownership information within 30 days. This includes things like:
- changes to the organization’s name, business address, or taxpayer ID number,
- changes to the individual’s name, residential address, or identification number,
- if the individual’s 25% ownership stake is transferred to someone else, or
- if a new 25% owner is added to the LLC
If you are a beneficial owner of multiple entities, you might consider obtaining a FinCEN identifier (FinCEN ID) so that you can update your personal information for all entities at once.
Penalties for Non-Compliance
Failure to comply with the CTA’s reporting requirements can result in significant civil and criminal penalties. Civil penalties can be as high as $500 per day that the violation continues, up to a maximum of $10,000. Criminal penalties include fines of up to $10,000 and up to 2 years in prison.
Given the serious consequences, it’s crucial for single-member LLCs to carefully review the CTA’s requirements and ensure they meet all reporting deadlines and obligations.
What to Do Next
If you own a single-member LLC, we recommend taking the following steps to prepare for the CTA:
- Review the Treasury Department’s final rules on beneficial ownership reporting to fully understand your obligations.
- Gather the required identifying information about yourself as the sole beneficial owner and the organization’s information.
- Take immediate action to complete your filing on or before the March 21, 2025 filing deadline.
- Work closely with your accountant and/or business attorney if you have questions to ensure complete and timely compliance.
- Report the required information using the Beneficial Ownership Information filing system.
The CTA represents a significant shift in corporate transparency requirements. But by understanding the law and taking proactive steps, single-member LLCs can fulfill their new reporting duties and avoid potential penalties. Don’t wait until the last minute to fulfill your reporting obligations.