The Corporate Transparency Act

Key Requirements and Deadlines Under the Corporate Transparency Act

Effective January 1, 2024, the Corporate Transparency Act (CTA) mandates that all domestic and foreign entities qualifying as “reporting companies,” file a Beneficial Ownership Information Report (BOIR) with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). This requirement aims to enhance transparency and combat illicit activities like money laundering and terrorist financing. Below is a detailed overview of the CTA’s requirements, deadlines, and implications.

 Key Deadlines for Corporate Transparency Act Compliance

1. Reporting Companies Existing Prior to January 1, 2024, must submit their BOIR by January 1, 2025.

2. Reporting Companies Formed/Registered on or after January 1, 2024, and before January 1, 2025, must file their BOIR within 90 days of formation/registration.

3. Reporting Companies Formed/Registered after January 1, 2025, must file their BOIR within 30 days of formation/registration.

4. Updating or Correcting BOIRs, must be done within 30 days of discovering any inaccuracies or changes in the reported information.

 Introduction to the Corporate Transparency Act

The Corporate Transparency Act, part of the Anti-Money Laundering Act of 2020, is designed to bolster transparency in business operations by requiring detailed disclosure about beneficial owners and company applicants. Non-compliance with the CTA can result in significant penalties, including:

- Civil penalties up to $500 per day.

- Criminal penalties up to $10,000 and imprisonment for up to two years.

 Who Must Report?

A “reporting company” under the CTA includes:

1. Domestic Entities: Corporations, limited liability companies, or other entities created by filing formation documents with a U.S. Secretary of State.

2. Foreign Entities: Companies registered to do business in the U.S. with a Secretary of State or similar office.

Exemptions: Several entities are exempt from reporting, including:

- Entities already regulated by federal agencies (e.g., banks).

- Tax-exempt entities.

- Large operating companies (LOCs), defined by criteria such as having more than 20 full-time employees, generating over $5 million in annual gross receipts, and maintaining a physical office in the U.S.

- Wholly-owned subsidiaries of exempt entities.

If a company is initially exempt but later loses its exemption, it must file a BOIR within 30 days of becoming a reporting company.

 BOIR Disclosures

The BOIR must include:

- Company Information: Name, trade names, principal place of business, state of formation/registration, and IRS Taxpayer Identification Number.

- Beneficial Owner Information: Details about individuals who directly or indirectly exercise substantial control over the company or own/control at least 25% of its interests. This includes senior officers, significant influencers, and major shareholders.

- Company Applicant Information: For entities formed on or after January 1, 2024, details about the individual(s) who filed or directed the filing of the formation/registration documents.

Personal Identifying Information:

- Full legal name, date of birth, residential address, ID number from a government-issued ID, and an image of the ID.

FinCEN ID: Individuals can obtain a FinCEN ID, which can be used in place of personal identifying details on the BOIR.

 Filing and Updating

- Submission: BOIRs should be filed through FinCEN’s Beneficial Ownership Secure System (BOSS), accessible via [FinCEN BOSS] (https://boiefiling.fincen.gov/).

- Updates and Corrections: Required within 30 days of any change or discovery of inaccuracy. Updates are not needed for changes to company applicant information.

 Certification

The individual filing the BOIR must certify under criminal penalty that the information is accurate and complete. The reporting company is responsible for ensuring the accuracy of the submitted BOIR.

 Conclusion

Entities should promptly assess whether they are subject to the Corporate Transparency Act’s reporting requirements and implement systems to manage and update the necessary information. Establishing procedures to comply with the CTA will help avoid penalties and ensure adherence to regulatory standards.

For further guidance, consulting FinCEN’s Small Entity Compliance Guide and legal counsel is advisable to navigate the complexities of Corporate Transparency Act compliance effectively.

If you and/or your business is in need of legal guidance to help navigate the key requirements and compliance of the Corporate Transparency Act contact Lars Soreide, Esq., at Soreide Law Group and speak to an attorney regarding these new mandates at: 888-760-6552.