THE CORPORATE TRANSPARENCY ACT—THINGS TO KNOW
By Stephanie M. Shortall, Esq. & Jeremy A. Whalen, Esq.
Business owners and Non-Profits need to be aware of new requirements coming in 2024. These entities are or may be required to comply with the reporting requirements of the Corporate Transparency Act (CTA).
What Is The Corporate Transparency Act
The CTA is a United States Federal law (31 U.S. Code § 5336) which was enacted on January 1, 2021 with the aim of combatting money laundering and other illegal activities. In September of 2022, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued final rules establishing the beneficial ownership information reporting requirements (“BOI Reporting Rule”) of the CTA. Thereafter, on March 24, 2023 FinCEN released its first set of guidance on the upcoming BOI Reporting Rule. Under the CTA, beginning January 1, 2024 domestic and foreign reporting companies will be required to report their beneficial ownership information (“BOI”) to FinCEN.
It is FinCEN’s intent to compile a database of all reported BOI. The information collected by FinCEN is to be used for the purposes of preventing tax evasion, corruption, concealment of assets and money laundering crimes. FinCEN will permit Federal, State, Local, and Tribal officials, as well as certain foreign officials who submit a request through a U.S. Federal agency, to obtain BOI for authorized activities related to national security, intelligence, and law enforcement.
Requirements Under The Corporate Transparency Act
Which Companies Are Required To Report
- The CTA applies to domestic corporations, partnerships, LLCs, and all other entities created by filing documents with a state’s secretary of state or equivalent office, as well as foreign entities registered to do business in any U.S. State
- There are 23 types of entities exempt from the CTA’s BOI Reporting Rule. More information about exempt entities can be found here
Who Is A Beneficial Owner Of A Company
- Any individual who exercises substantial control over a company, or who owns or controls at least 25% of a company
Information Required To Be Contained In The Report
Regarding The Reporting Company:
- Legal name and any trade name or DBA
- Address of the company
- The jurisdiction where the company was formed or first registered
- The Taxpayer Identification Number (TIN)
- Companies formed on or after January 1, 2024 will be required to report their company applicants (the individual who directly files the document that creates the company)
Regarding Each Of The Company’s Beneficial Owners and Applicants:
- Legal name
- Address (in most cases a home address)
- An identifying number from a driver’s license, passport, or other approved document (as well as an image of the document that the number is from)
Timing & Filing Of Reports
- The CTA reporting requirements will be effective as of January 1, 2024
- Please note, FinCEN will not accept any applications prior to January 1, 2024
- For “Existing Reporting Companies” (companies created to do business in the U.S. before January 1, 2024) the first report is due by January 1, 2025
- For “New Reporting Companies” (companies created or registered to do business in the U.S. on or after January 1, 2024) the first report is due within 30 calendar days of formation
- Updated Reports are required when there is a change to previously reported information about the reporting company itself or its beneficial owners, within 30 days of the change
- Corrected Reports are required when previously reported information was inaccurate when filed
The CTA applies civil and criminal penalties for those who willfully fail to report or update a reporting company’s BOI and for those who provide false or fraudulent BOI. The penalties include: $500 per day for a continuing violation (civil); Fines up to $10,00 for willful non-compliance (civil); Up to 2 years in prison (criminal).
It is important to know that our firm will not undertake completing these required filings on behalf of new or existing clients. If you are seeking advice regarding these filings, please contact Stephanie M. Shortall, Esq. or Jeremy A. Whalen, Esq. to discuss engaging our firm for this purpose.