The Corporate Transparency Act – New Federal Requirements Effective January 1, 2024
Important Update:
2/20/2025: The injunctions on the Corporate Transparency Act detailed below have all been lifted. As of February 20, 2025, the deadline for most companies to file their BOI Report is March 21, 2025. All companies formed on or prior to February 20, 2025, must file their initial BOI Report, and update any previously filed reports if necessary, by March 21, 2025. All companies formed after February 20, 2025, have 30 calendar days to file their initial BOI Report. Note, if a reporting company’s principal place of business is located in an area designated by both FEMA and the IRS as qualifying an individual for public assistance and filing relief as a result of a hurricane or other natural disaster, the reporting company may have a further extension to file its BOI Report. Additional information can be found on FinCEN’s website. We are closely monitoring developments and legislation and will continue to provide updates on this blog as soon as they are available.
1/27/2025: On January 23, 2025, the U.S. Supreme Court granted the government's motion to stay a nationwide injunction issued by the U.S. District Court for the Eastern District of Texas in Texas Top Cop Shop, Inc. v. McHenry (formerly Texas Top Cop Shop, Inc. v. Garland). However, a separate nationwide order in Smith v. U.S. Department of the Treasury from another federal judge in Texas remains in effect. As a result, reporting companies are not currently required to file beneficial ownership information with FinCEN, despite the Supreme Court's decision. They may, however, choose to voluntarily submit these reports.
12/27/24: On December 26, 2024, the United States Court of Appeals for the Fifth Circuit vacated its own stay of the nationwide injunction. Thus, Reporting Companies are not obligated to comply with the Corporate Transparency Act at this time. We will continue to provide updates on this issue.
12/26/24: On December 23, 2024, the United States Court of Appeals for the Fifth Circuit lifted the nationwide injunction prohibiting the enforcement of the CTA. Thus, Reporting Companies are once again obligated to comply with the Act. Fortunately, however, FinCEN extended the January 1, 2025 deadline for reporting companies to January 13, 2025.
12/3/24: A nationwide preliminary injunction has been issued prohibiting the enforcement of the CTA and the required reporting filed thereunder. This means companies are not currently required to comply with the January 1, 2025 reporting deadline. However, an appeal has been filed by the Department of Justice so the injunction could be lifted or amended at any time. Therefore, we recommend continuing to gather the information needed to complete the report as if the January 1, 2025 deadline were still in effect. It is optional whether you want to go ahead and voluntarily file the BIO report or wait for further court action.
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.
