The Corporate Transparency Act – New Federal Requirements Effective January 1, 2024
Who is required to file a report?
Beginning January 1, 2024, the Corporate Transparency Act (CTA) imposes significant new reporting requirements on a broad range of corporate entities. With certain exceptions, any domestic entity created by the filing of a document with a secretary of state or any similar office (which would generally include corporations, limited liability companies, limited partnerships, and limited liability partnerships) is a reporting company subject to the reporting requirements. Most “small” entities will be reporting companies. The CTA also applies to foreign entities registered to do business by the filing of a document with a secretary of state or any similar office.
The CTA requires reporting companies to file a beneficial ownership information report (BOI Report) with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). The BOI Report must provide information about two categories of individuals: (1) the beneficial owners of the entity; and (2) for reporting companies created on or after January 1, 2024, the company applicants of the entity. A beneficial owner is any individual who, directly or indirectly, either (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25 percent of the ownership interests of a reporting company. The terms “substantial control” and “ownership interest” are broadly defined. A company applicant is (1) an individual who directly files the document that creates or registers the entity, or, if more than one individual is involved in the filing of the relevant document, (2) any individual who is primarily responsible for directing or controlling the filing of such document.
When are BOI reports due and how are they filed?
Reporting companies created prior to January 1, 2024, will have until January 1, 2025, to file initial BOI Reports with FinCEN.
Reporting companies created on or after January 1, 2024, but before January 1, 2025, will be required to file initial BOI Reports within 90 days after the effective date of the entity’s creation.
Reporting companies created on or after January 1, 2025, will be required to file initial BOI Reports within 30 days after the effective date of the entity's creation.
Reporting companies must also file reports of changes in previously filed reports, including corrections of previously filed inaccurate information, within 30 days of the change or discovery of the inaccuracy.
BOI Reports must be filed electronically with FinCEN on its BOI-E Filing System, which can be accessed here: https://boiefiling.fincen.gov/.
What information does a BOI Report require?
The BOI Report is required to include information about both the reporting company and its beneficial owners. Reporting companies created after January 1, 2024, must also provide information for company applicants.
- Reporting Company – Reporting companies must report the following information: full legal name and any trade or “doing business” names; address; jurisdiction of organization of domestic reporting company or jurisdiction where foreign reporting company first registers; and IRS, TIN, EIN for a domestic reporting company, or similar tax identification number for a foreign reporting company.
- Beneficial Owner – Each beneficial owner must report the following information: full legal name; birthdate; home address; and a unique identifying number and issuing jurisdiction from an acceptable identification document, such as a passport, driver’s license, or other government-issued identification document (and an image of such document).
- Company Applicant – Reporting companies created after January 1, 2024, also must include the same information about the company applicant as the information required for beneficial owners. However, the company applicant’s business address may be used rather than a home address in certain circumstances.
If an individual provides the required information to FinCEN directly, the individual may obtain a FinCEN identifier, which can then be provided to FinCEN on a BOI Report in lieu of the required information about the individual.
Are there penalties for failure to comply with the filing requirements?
Yes. Failure to comply with the initial and ongoing reporting requirements can lead to civil and criminal penalties, including a maximum civil penalty of $500 per day (up to $10,000) and imprisonment for up to ten years.
Resources
Additional information is available on the FinCEN website at https://www.fincen.gov/boi. HSB lawyers can assist you in determining whether you are required to file a beneficial ownership report or qualify for an exemption from filing, and, if a filing is required, in determining the persons for whom information is required.
For questions or assistance with the new CTA requirements, please contact a member of our CTA Team.
