New Annual Filing Requirement for Michigan Business Owners
Starting January 1, 2024, most owners of limited liability companies and corporations will be required to annually disclose certain information about their company to FinCEN, the U.S. Treasury’s Financial Crimes Enforcement Network. In 2020, Congress passed the Corporate Transparency Act (“CTA”) which requires certain companies to disclose identifying information of any person who owns or controls at least 25% of the ownership interests of a company or any person who exercises substantial control over a company. The purpose of the law is to prevent criminals from using businesses for illicit activities like money laundering.
Some companies are exempt from the annual filing, but it is a small category that includes financial institutions, banks, 501(c) charities, and other entities that are already subject to some kind of reporting or disclosure requirement. Generally speaking, the annual filing requirements apply to most business owners, including those with single-member limited liability companies.
The CTA will no doubt add to the existing duties of running a business by creating yet another governmental mandated administrative burden. To deter non-compliance, the government has implemented penalties for not meeting the annual filing requirements including fines ranging from $500 to $10,000 per violation and possible jail time of up to two years. Business owners are strongly encouraged to become familiar with the requirements of the CTA and to meet their annual filing obligation. For the first filing year, existing businesses can file an annual report anytime within the 2024 calendar year while entities created during the 2024 calendar year must file within 90 days of formation.
Protect your business and yourself by ensuring compliance with the new CTA regulations. Business owners can find out more information about the CTA and its filing requirements on the FinCEN website including a 50-page publication titled “Small Entity Compliance Guide” that is available for download. Clients may request legal assistance from our office including determining whether their business must file annual reports, analysis of filing requirements specific to their business, and help with filing annual reports.
Richard R. Zmijewski is an attorney with the Mitzel Law Group PLC serving clients in the Ann Arbor community and greater Detroit Metro. His practice centers on estate planning including revocable living trusts, durable powers of attorney, patient advocate designations, planning for succession of family and closely owned businesses, and also with probate and trust administration matters.