Best Practices for Complying with the Corporate Transparency Act

As businesses work to comply with the Corporate Transparency Act (CTA), it’s important to realize that CTA reporting is NOT a one-time or even annual require­ment. Updates are required whenever company information or beneficial owner information changes, and these must be reported within 30 days. Now is the time for businesses to develop a plan for timely filing and to consider the new procedures that come with this responsibility.

Educating Beneficial Owners, Managers and Leadership

Beneficial owners must be informed about their reporting obligations and the need to notify the company of any changes in their information immediately. They need to be aware of the information they must keep up to date. Some examples include:

• Modification in beneficial owner information (BOI): Changes in residential address, name or getting a new driver’s license or passport.

Likewise, managers and leadership must understand when updates are required for both beneficial owners and the company itself. These are events that may also trigger a need for an updated report:

• Changes in company information: Registering a new trade or doing-business-as name or moving to a new business address.
• Alterations in beneficial ownership: Appointment or departure of beneficial owners with substantial control (C-suite), changes in ownership structure or death of a beneficial owner.

Establishing a schedule for verifying company information and current information with beneficial owners is a sound strategy to ensure accuracy.

For CPAs who are responsible for maintaining compliance for clients or their company, it is important to discuss who within the organization is responsible for keeping the CPA updated on changes.

Human Resources Coordination

The HR team, or those handling employee relations, needs to be familiar with the CTA requirements, especially those related to substantial control roles. They must ensure that new hires in positions of substantial control are added or removed from the report. Also, if a new position is created, it must be evaluated for reporting status.

Establishing New Policies and Procedures

It’s important to develop clear policies outlining the process for updating required information. Standard operating procedures should include answers to the following questions:

• Does the company have educational resources to share with beneficial owners, managers and leadership?
• Will the company proactively ask beneficial owners if their information changed? Who will do this and how often?
• What is the channel for the beneficial owners to share changes?
• Who is responsible for submitting the updated BOI reports?
• Is HR watching for changes in job descriptions or new roles that might give someone substantial control?
• Who will monitor changes to legislation and adjust internal processes?

Responsibility for Filing Updates

Determine who will be responsible for filing updates with FinCEN. Clear delegation can prevent lapses in compliance.

When an owner gets a FinCEN ID, the company’s ability to file certain updates about their personal information may be limited. Once an owner has a FinCEN ID and uses it on the BOI report, they can only update their information through their login.gov account. BOI reporting is the company’s responsibility. Implementing a system to verify that beneficial owners have updated their information with FinCEN might involve collecting proof of submission from the owners.

Software is available to streamline CTA compliance, securely manage personal information and reduce data reentry. Unlike the FinCEN website, which requires full data reentry for minor updates, software allows for adjusting only the changed infor­mation before filing.

The CTA introduces new complexities for business owners, but with planning and the right tools, they can navigate these changes successfully. CPAs may handle some of the tasks mentioned above, but businesses will still need to establish clear procedures to avoid the potential penalties of this new regulatory landscape.