Understanding the Corporate Transparency Act’s New Reporting Requirements
On January 1, 2024, the Corporate Transparency Act (CTA) went into effect, marking a significant milestone in the U.S. government’s fight against financial corruption and impacting millions of businesses and other entities. The CTA imposes new reporting requirements on companies to disclose their beneficial owners, making it harder for individuals to use shell companies to launder money or hide illicit activities. In this post, we’ll explore the CTA’s key provisions, beneficial ownership information (BOI) filing requirements, and how these changes impact your business.
Background:
Under the CTA, “Reporting Companies” are required to report certain identifying information about the individuals who are “Beneficial Owners” and “Company Applicants” to the Financial Crimes Enforcement Network (FinCEN), a unit of the U.S. Department of the Treasury.
Who Must File:
Subject to certain exceptions, “Reporting Companies” generally include any corporation, limited liability company, or other similar entity that was either:
- Created in the United States by filing a document with a secretary of state or similar office, or
- Created under the law of a foreign country and registered to do business in the United States by filing a document with a secretary of state or similar office.
A “Beneficial Owner” is an individual who either:
- Exercises substantial control over a Reporting Company, or
- Owns or controls at least 25 percent of a Reporting Company’s ownership interests.
A “Company Applicant” (whose identity is required only for Reporting Companies created on or after January 1, 2024) is the individual who directly files the document that creates or registers the company and, if more than one person is involved, the individual primarily responsible for directing or controlling the filing.
Deadlines:
- Reporting Companies created/registered before January 1, 2024, will have until January 1, 2025, to file their beneficial ownership information report.
- Reporting Companies created/registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days thereafter to file their BOI report.
- Reporting Companies created/registered on or after January 1, 2025, will have 30 calendar days thereafter to file their BOI report.
Penalties:
As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to:
- Civil penalties of up to $500 for each day the violation continues (adjusted for inflation), and
- Criminal penalties of up to two years imprisonment and a fine of up to $10,000.
How to File:
BOI reports can be filed electronically through a secure filing system available via FinCEN’s BOI E-Filing website: https://boiefiling.fincen.gov.
For a more comprehensive description of the requirements under the CTA relating to its BOI filing requirements for small businesses, please click here to access the attached BOI Small Entity Compliance Guide and FAQs, which can assist in determining Reporting Companies and their BOI filing requirements.
How TaberPatrick Can Help:
For guidance on the CTA or if you would like TaberPatrick to assist you in determining your BOI filing requirements and filing the BOI reports, contact your attorney at TaberPatrick at [email] or [phone number].
* This blog post is for informational purposes only. Please refer to the CTA and related guidance for complete and detailed requirements.
