Background

In 2021, Congress passed the Corporate Transparency Act (the “CTA”). The new law took effect on January 1, 2024, requiring limited liability companies, corporations, and other entities created by the filing of a document with a secretary of state (collectively, “Reporting Companies”) to report information about their beneficial owners to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). Failure to comply with the CTA’s reporting requirements carries both civil and criminal penalties.

Which Entities Must Report

Some Reporting Companies are exempt from the reporting requirements, e.g., publicly listed entities and banks, because the beneficial owner information is already available elsewhere. For most closely held entities, the only exemption that might apply is if the entity has [1] a physical office in the US; [2] more the $5M in gross revenue in the previous year; and [3] has more than 20 fulltime employees. Absent this exemption, a closely held entity will have to abide by the reporting requirements.

Deadlines for Reporting

To comply with the CTA, Reporting Companies must submit Beneficial Ownership Information Reports (“BOI Reports”) directly to FinCEN. For Reporting Companies in existence before January 1, 2024, BOI Reports must be filed before January 1, 2025. For Reporting Companies created on or after January 1, 2024, and before January 1, 2025, BOI Reports must be filed within 90 calendar days from the date the entity is formed with a secretary of state. For Reporting Companies created on or after January 1, 2025, BOI Reports must be filed within 30 calendar days from the date the entity is formed with a secretary of state.  

Information to Be Reported

            BOI Reports submitted to FinCEN must identify the Reporting Company, its beneficial owners (“Beneficial Owners”), and company applicants (“Company Applicants”). The CTA also requires Reporting Companies to disclose personal identifying information including name, birthdate, address, and an image of a government-issued identification, with respect to each Beneficial Owner and Company Applicant. The CTA defines a Beneficial Owner as an individual who directly or indirectly owns at least 25% of the ownership interests of such Reporting Company or directly or indirectly exercises substantial control over the Reporting Company. The CTA defines Company Applicant as both the individual who directly files the document that created the Reporting Company and the individual who is primarily responsible for directing or controlling such filing. Reporting Companies created before January 1, 2024, are not required to provide Company Applicant information on their BOI Reports.

Updates to BOI Reports

         In addition to initial BOI Reports, Reporting Companies are required to file updated BOI Reports to reflect any change with respect to who is a Beneficial Owner or information reported for any particular Beneficial Owner. The deadline for filing an updated BOI Report is 30 calendar days after the date on which such change occurs.

Obtaining a FinCEN ID (for Individuals and Reporting Companies)

            An individual may obtain a FinCEN identifier (“FinCEN ID”) by submitting to FinCEN an application containing the personal information about the individual that would otherwise be reported on the BOI Report. If an individual has obtained a FinCEN ID and provided such FinCEN ID to a Reporting Company, the Reporting Company may include such FinCEN ID in its BOI Report in lieu of the personal information that would otherwise be required. A Reporting Company may obtain a FinCEN ID by submitting to FinCEN an application at or after the time that the entity submits an initial report.

See the following for a more detailed discussion of the CTA requirements:

• Bell, Davis & Pitt Q&A: Click Here
• FinCEN Website: https://www.fincen.gov
• FinCEN Small Entity Compliance Guide: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide_FINAL_Sept_508C.pdf
• FinCEN Beneficial Ownership Reporting Q&A: https://www.fincen.gov/frequently-asked-questions

If you have questions about CTA compliance, please contact your Bell, Davis & Pitt attorney.  If you have not requested your Bell, Davis & Pitt attorney to assist you with CTA compliance, it will be assumed that you understand your CTA reporting obligations and will handle your own reporting.