New Filing Requirement for Michigan Business Owners

Starting January 1, 2024, most owners of limited liability companies and corporations will be required to 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.  In addition to an initial filing, a company must also update information previously disclosed to FinCEN whenever there is a change in ownership, control, or a change or correction to other information previously disclosed.  The purpose of the law is to prevent criminals from using businesses for illicit activities like money laundering.

Some companies are exempt from the 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 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 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 filing obligation.  For the first filing, existing businesses can file a report anytime within the 2024 calendar year while entities created during the 2024 calendar year must file within 90 days of formation.  Updates involving previously disclosed information to FinCEN must be filed within 30 days of the information having changed.

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 a report, analysis of filing requirements specific to their business, and help with filing reports.

[This article was last updated on March 26, 2024]