Corporate Transparency Act

Corporate Transparency Act (CTA)

As you may be aware, starting January 1, 2024, business entities and owners, operating in the United States, have a new filing requirement. Business owners will be required to report information to the Financial Crimes Enforcement Network (FinCEN) regarding the identities of actual owners and beneficial owners (individuals that control the entity).

The responsibility to comply with the CTA reporting requirements is that of the business owner(s). The completion of the registration has been deemed to be a legal matter and accordingly, our firm and associates will not be completing the filing requirements for you or your business.

We have prepared some information and resources to assist you in determining if you have a filing requirement and if so, how you can arrange to complete your registration.

 

What is the Corporate Transparency Act (CTA)?

The Act was passed by Congress in an effort to create transparency regarding entities and who owns and controls a specific entity. This transparency is being required to try to decrease the ability for unscrupulous businesses to hide their identity while conducting any illegal activities such as money laundering, drug related activities and/or terrorism.

The FinCEN website has a specific section (BOI Beneficial Ownership Information) dedicated to assisting you in determining if your entity has a filing requirement and if so, assisting you with the information you need to report and in completing the actual registration. All registrations must be completed online.

https://www.fincen.gov/boi

A helpful tool: The Small Entity Compliance Guide, which provides detail information regarding who must register and the information that must be provided, can be found at the FinCEN site:

https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf

Reporting Companies

There are two types of reporting companies: domestic and foreign.

  • Domestic reporting company – a C or S corporation, limited liability company (LLC), Single Member LLC (SMLLC), Partnerships, or any entity registered with the secretary of state.
  • Foreign reporting company – a corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any US state.

Please note, there are some entities/industries that are exempt from the BOI reporting rules. A detailed list of the 23 exempt entities can be found in The Small Entity Compliance Guide, section 1.2 “Is my company exempt from the reporting requirements”.

 

Beneficial Owner Information (BOI)

A “beneficial owner” includes any individual who, directly or indirectly, exercises substantial control over a reporting company. An individual exercises “substantial control” over a reporting company if the individual meets any of four general criteria:
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  • The individual is a senior officer.
  • The individual has authority to appoint or remove certain officers or a majority of directors of the reporting company.
  • The individual is an important decision-maker.
  • The individual has any other form of substantial control over the reporting company.

A “beneficial owner” also includes any individual who, directly or indirectly, owns or controls at least 25% of the ownership interests of a reporting company.

Filing Timeline

  • Reporting companies created or registered during 2024, will have 90 calendar days from the date their registration is effective to file their initial BOI report.
  • Reporting companies created or registered on or after Jan. 1, 2025, will have 30 calendar days from the date their registration is effective to file their initial BOI report.
  • Existing reporting companies, those that were created or registered before Jan. 1, 2024, have until Jan. 1, 2025, to file their initial BOI report.

Once an initial report has been filed with FinCEN, both new and existing companies will have to file updates to their registration within 30 days of a change regarding the entity, the owners, or any beneficial owners. Some, but not all reportable changes would be things such as changes of address for the entity or any individual listed, change in driver’s license information previously reported, addition or removal of any actual or beneficial owners.

Other Information

Companies should review the BOI rules and official guidance carefully to determine what steps should be taken to ensure compliance. Additional information and FAQs can be found here:

https://www.fincen.gov/boi-faqs

Both individuals and corporate entities can be held liable for willful violations and can be subject to both civil and criminal penalties. Penalties such as $500 per day up to $10,000, per entity, for willful noncompliance and $250,000 for misuse of ownership information apply. Criminal penalties, between 2-5 years of incarceration, may also may be imposed.

FLS cannot advise on or assist with BOI reporting preparation. We recommend that you reach out to your attorney if you have questions or concerns regarding complying with these filings.