What is the Corporate Transparency Act?
The Corporate Transparency Act (the “CTA”) became effective on January 1, 2024, and all required companies must comply with the new reporting requirements. The CTA requires specific private companies that meet the CTA criteria of a “reporting company” (“Reporting Company”) to file informational reports with the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) disclosing its beneficial ownership information as it relates to the company and its owners and principals. The CTA will require most small businesses, including corporations and limited liability companies, to report the required information.
A Reporting Company will report its beneficial ownership information through a new federal government online portal called the “Beneficial Ownership Secure System.” A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests.
When must a reporting company report?
A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report.
A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report. This 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.
Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports with FinCEN.
Where does the report get filed?
The report is only filed electronically at FinCEN’s website. Additional information about the reporting requirements, including answers to questions such as “is my company required to report beneficial ownership information to FinCEN,” “who is a beneficial owner,” and “when do I need to report my company’s beneficial ownership information” is available on FinCEN’s beneficial ownership information webpage: https://www.fincen.gov/boi.
Is an attorney required in order to file a report?
FinCEN expects that most reporting companies will be able to submit their beneficial ownership information to FinCEN on their own using the guidance FinCEN has issued. Reporting companies that need help meeting their reporting obligations can consult with professional service providers, such as lawyers, accountants, or enrolled agents.
Are there exemptions from CTA?
CTA enumerates a number of exemptions which include companies such as banks, credit unions, utilities, insurance companies and others listed by FinCEN.
What are the penalties for non-compliance?
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 that the violation continues. A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.
Is the CTA legal?
There have been legal challenges to CTA and at least one U.S. District Court in Alabama has ruled that CTA is unconstitutional. That ruling is on appeal but in the meantime, reporting compliance is still required.
