NEW BENEFICIAL OWNERSHIP REPORTING DEADLINE APPROACHES

The Corporate Transparency Act (CTA), effective January 1, 2024, requires certain business entities (reporting companies) to report beneficial ownership information (BOI) to the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN).   The deadline for businesses that were created before January 1, 2024 have until January 1, 2025 to file their initial BOI report.  For reporting companies created or registered during 2024, they must file their initial BOI report within 90 days, and for reporting companies created or registered on or after January 1, 2025, they must file within 30 days from receiving notice that their creation or registration is effect.

The CTA is intended to aid law enforcement in combatting illicit activity conducted through anonymous shell companies by requiring many private entities formed or registered in the U.S. to report information about their beneficial owners and company applicants to FinCEN.

The CTA defines “reporting company” as both:

The CTA excludes from the reporting company definition 23 categories of entities. Many of these exemptions are for entities that are already subject to significant regulations by federal or state government agencies. The determination of whether an exemption applies can be complex, so we recommend contacting our office to confirm whether any of the applicable exemptions apply to any entity in which you own an interest.

A “beneficial owner” is any individual who, directly or indirectly, either:

An individual exercise substantial control over a reporting company if the individual does any of the following:

A “company applicant” is generally defined as, for domestic reporting companies, the individual that files the document forming the domestic reporting company; for foreign reporting companies, the individual that files the document that first registers the foreign reporting company in any state or tribal jurisdiction, and for both domestic and foreign reporting companies, the individual who is primarily responsible for directing or controlling such filing if more than one individual is involved in the filing of the document.

Note: A reporting company is not required to report its company applicants if it was created or first registered in the U.S. before January 1, 2024.

There are both civil and criminal penalties for violating the CTA, including a fine up to $10,000, imprisonment for up to two years, or both, for any person willfully providing or attempting to provide false or fraudulent BOI; or failing to report complete or updated BOI to FinCEN.

Penalties may also apply to reporting companies and individuals who cause a reporting company not to report or are senior officers of a reporting company at the time of its failure to accurately report or update BOI.

The BOI reporting requirements can be complex, and legal guidance is strongly encouraged to ensure that any entity you own an interest in complies with the CTA requirements.  Please reach out to us with any questions you may have about the CTA reporting requirements or to assist you with filing BOI reports for your entity.

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