The Corporate Transparency Act
Effective January 1, 2024, the Corporate Transparency Act (“CTA”) requires nearly every small business entity in the U.S. to file a report online (a “BOI Report”) with the Financial Crimes Enforcement Network (“FinCEN”) disclosing information on its “Beneficial Owner(s),” defined as being any individual or entity who directly or indirectly, through any contract, arrangement, understanding or otherwise:
-
Exercises “substantial control” over the entity; or
-
Owns at least 25% of the entity; or
-
Controls ownership of at least 25% of the entity.
The concept of “substantial control” is nebulous and may require information to be reported with respect to certain officers or fiduciaries. When trusts own interests in these entities, it may require disclosure of information about the trustee, certain beneficiaries, and the grantor of a revocable trust. Although there are regulations, there are still many unresolved issues. Every entity has at least one beneficial owner, but there is no maximum number of beneficial owners who must be reported.
The CTA applies to all subject entities having less than $5 million in annual revenues or less than 20 U.S. full-time employees. This applies to any subsidiaries or affiliated entities as well.
FinCEN is a bureau of the U.S. Department of the Treasury. The stated purpose of the CTA is to assist in combating illicit financial transactions. Exemptions exist for specific business entities, including securities issuers, domestic governmental authorities, and banks.
The deadline for submitting the BOI Report for all non-exempt entities in existence before 1/1/2024 is the last day of 2024.
For non-exempt entities formed in 2024, the deadline for submitting the BOI Report is 90 days from the date of formation.
For non-exempt entities formed on or after 1/1/2025, the deadline for submitting the BOI Report is within 30 calendar days from the date of formation.
The deadline for any required updates or corrections to a BOI Report necessitated by a change in circumstances, making the prior filing inaccurate, such as ownership change, change of addresses, etc. is 30 calendar days from the date the change occurred.
The penalties for not adhering to the above requirements are fines in the amount of Five Hundred Dollars ($500.00) per day, for a maximum of Ten Thousand Dollars ($10,000.00) and/or two (2) years imprisonment. These penalties are imposed on the entity and/or its senior officers.
BOI Reports will not be a matter of public record, like filings with the Secretary of State. However, BOI Reports may be accessed by qualifying requests from federal agencies engaged in national security, intelligence and law enforcement, federal and state regulatory agencies assessing financial institutions for compliance, the U.S. Department of Treasury and foreign law enforcement agencies with which we have a treaty.
Once again, if your company was formed before 1/1/2024 and is still in existence, you must submit a BOI Report on or before December 31, 2024. To do so yourself, you can access the FINCEN website at: https://www.fincen.gov/boi for more information and instructions on how to file.
If you wish to engage our law firm to assist you in filing the BOI Report, please contact our office to schedule an appointment. The deadline for seeking our assistance is October 31, 2024.
