What You Need to Know About the Corporate Transparency Act (CTA)

UPDATE as of 12/13/24: In December 2024, a federal court in Texas issued an order granting a nationwide preliminary injunction against enforcement of the CTA. FinCEN’s is appealing the order, but until further notice, reporting companies are not required to file but may do so voluntarily if they wish. We will monitor the status of this matter and will provide an update if enforcement resumes.

As a business owner, you may already have heard that the Corporate Transparency Act (“CTA”) took effect on January 1, 2024. The CTA requires all entities formed or registered to do business in the United States to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) unless an exemption applies.

What’s the Purpose of the Corporate Transparency Act?

The Corporate Transparency Act was designed to increase transparency and combat tax fraud, money laundering, and other illegal activities. While the government can easily look into information on business structure and ownership of large corporations, there has been little to no transparency when it comes to small businesses. With over 27,000,000 small businesses without employees in the United States, this act aims to target these small businesses. 

Do You Need to File?

The CTA applies to most small businesses in the United States, including foreign companies that are registered to do business in the U.S. These types of businesses include limited liability companies, limited partnerships, business trusts, most general partnerships, and corporations created by filing a document with the secretary of state or similar office under their state law. 

There are several exemptions to the filing requirements, but we expect that the majority of our clients will be non-exempt reporting entities and will be required to file. Additional information, including filing instructions and a complete list of exemptions, is available here: Beneficial Ownership Information Reporting | FinCEN.gov.

What Information Does the CTA Require?

The act refers to owners of companies as “beneficial owners.” These are defined as any individuals who, either directly or indirectly:

• Exercise substantial control over a reporting company, or
• Own or control at least 25% of the ownership interests of a reporting company

Each such beneficial owner is required to report his or her name, date of birth, address, and an identifying document (such as a passport or driver’s license) as well as a photo of that document.

Are There Any Privacy Concerns? 

Although you are reporting personal information, this information will not be made publicly available. It is only going to be accessible by certain government agencies, financial institutions, and used for law enforcement, national security, and intelligence purposes. 

What are the Deadlines to File?

The deadlines for filing vary depending on when you started your business. There are three primary deadlines that you should be aware of. 

January 1, 2025:

All non-exempt entities formed before January 1, 2024, to comply with the reporting requirements need to file by January 1, 2025. 

Within 90 Days of Business Formation or Registration:

Any new non-exempt entities formed or registered to do business in the United States between January 1 and December 31 of this year must file within ninety days of the date of formation or registration. 

Within 30 Days of Business Formation or Registration:

Any new non-exempt entities formed after December 31, 2024, must file within 30 days of the date of formation or registration.

Do I Need to File Every Year?

No, this is a one-time filing, however, if there are any changes to the reported beneficial ownership, an amended report must be filed within thirty days of such change.

Are There Any Penalties for Noncompliance?

If you choose not to file or provide false information, you can be subject to fines and even criminal penalties. The CTA provides for civil fines of $500 per day and up to $10,000 per violation of the act. If you fail to comply or find yourself with multiple violations, you can face tens of thousands of dollars in fines. Additionally, the criminal penalty for violations of the act is up to two years of imprisonment.

What about the Recent Disputes about the Constitutionality of the CTA?

There have been some legal challenges to the CTA in recent months. On March 1, 2024, a federal judge in Alabama ruled that the CTA is unconstitutional. However, at this time, the ruling is limited to the plaintiffs in this particular case at issue (members of the National Small Business Association). Unless the Treasury Department announces that it will suspend CTA enforcement for all reporting entities (which it has not yet done), filings are still required. We will continue to monitor the situation and will update our clients in the event of any change in the reporting requirements.

Contact West Hill if You Have Questions 

While this new requirement may seem overwhelming at first, the best thing you can do is familiarize yourself with the CTA and reach out to a trusted legal professional if you have questions. We anticipate that we will be helping a majority of our clients file, so please do not hesitate to reach out to us if you have any questions or require any assistance to comply with these new filing requirements.

5 Legal Considerations for Developing a Mobile or Web App

While developing a new app for your business, it’s easy to get caught up in the features and functionality and forget about the legal considerations of app development. 

It’s important to make sure that your app is compliant, protects your intellectual property, keeps your user’s data safe, and protects your company from potential liabilities. 

While developing your app, here are five legal considerations to keep in mind: 

1. Intellectual Property Rights

It is never too early to start protecting your intellectual property. When you think about monetizing your app, you probably think about how much to charge your users or how it will enhance your relationships with customers. You might be overlooking the most lucrative asset: your intellectual property. 

When you protect your intellectual property, you can later sell your app, or your business, for significantly more than you could without these protections. 

Additionally, by protecting your intellectual property you can prevent competitors and other software developers from copying or stealing your hard work. 

Here are a few ways to protect your intellectual property: 

• Copyrights: protect your app’s source code, design, and other creative elements
• Trademarks: register your app’s name, logo, and other branding to prevent your competitors from using any of your branding assets
• Patents: protect your unique and innovative features

It is also important to respect the intellectual property rights of others when you incorporate their code into your app.  This can be open source or commercial software or integrations with web services.  In order to avoid infringing the copyright of these companies and developers, you need to keep track of this code and provide copyright notices and disclaimers as required.

2. App Store Guidelines and Review Process

Prior to launching your app, you should review the submission guidelines and policies of the app stores or web services that you plan to distribute your app through. Your app will need to comply with their content and policy restrictions to prevent your app from being removed down the line. 

Nearly all app publishers require that you include a Privacy Policy with your app that complies with their requirements. This is not a copy and paste exercise. You will need a customized privacy policy for your app in order to make it through the app approval process and protect yourself from data privacy claims.

3. User Data Privacy

In developing a Privacy Policy for your app, you need to think through what data you collect from your users during the registration process and other touchpoints throughout their experience. This is the first step to comply with data protection laws and regulations. 

Here are a few things to consider: 

• Where are your users?  Make sure that your app is compliant with the General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA).
• Make sure your Privacy Policy informs your users about the type of data that you collect, how you use it, and what security measures you have in place to protect their information. 
• Obtain consent from usersbefore you collect or process their data.

An attorney who specializes in both technology law and privacy can help you understand which laws and regulations apply to your app. 

3. End-User License Agreement (EULA)

In addition to a Privacy Policy, you need to have a clear End-User License Agreement (EULA) for your app. 

The EULA should outline your user’s responsibilities and prohibited actions within the app – including any flow-through terms required by your web services provider. It also protects your company’s rights and interests while also limiting your user’s ability to redistribute your app without permission. In your EULA, you can limit your liability and choose how and where disputes get resolved.

Finally, you should include disclaimers within your app that are required in your industry. 

5. Developer Agreements

If you plan to outsource components of the app development to other app developers, designers, or third-party service providers, you need to make sure that your company and its intellectual property are protected. 

Prior to starting the development process, you should sign clear and comprehensive contracts wwith these vendors outlining the roles and responsibilities of both parties.

These contracts should include confidentiality provisions, explicitly define who owns the intellectual property rights of the app’s components, and the developer’s obligation to report use of third party code. You should also include comprehensive data privacy terms if your developer will have access to your customers’ data.

Technology  Law Firm

Navigating the process of protecting your new app can be challenging without the help of skilled business and intellectual property lawyers who understand your technology. At West Hill, we specialize in helping software companies protect their intellectual property and business ideas. Contact us today for more information.

West Hill Reading List: Non-Fiction Edition

As a women-owned law firm and business, uplifting women and championing their rights and success is immensely important to us. 

To celebrate women, we’ve curated a special reading list with some of our favorite non-fiction books that focus on the empowerment of women and girls. Consider this blog post your official invitation to join our informal book club. 

West Hill’s Non-Fiction Favorites

A Woman of No Importance by Sonia Purnell 

Untamed by Glennon Doyle 

The Heart of a Woman by Maya Angelou 

Wild by Cheryl Strayed 

Women Mean Business: Over 500 Insights from Extraordinary Leaders to Spark your Success by Edie Fraser, Robyn Freeman Spizman, and Andi Simon, PhD 

Bossypants by Tina Fey 

Finding Me by Viola Davis 

You are Only Just Beginning by Morgan Harper Nichols 

If you think there’s a book missing from this list, let us know! 

Feel free to comment on this post or tag us on LinkedIn to share the book you’re currently reading. Let’s start a conversation! Which book are you reading first?