The Corporate Transparency Act (“CTA”) was enacted January 1, 2021, as part of the National Defense Authorization Act, representing the most significant reformation of the Bank Secrecy Act and related anti–money laundering rules since the U.S. Patriot Act. The CTA is intended to address and guard against money laundering, terrorism financing, and other forms of illegal financing by mandating certain entities (primarily small and medium-size businesses) to report “beneficial ownership” information to the Financial Crimes Enforcement Network (“FinCEN”). 

The CTA authorizes FinCEN, a bureau of the U.S. Treasury Department, to collect, protect, and disclose this information to authorized governmental authorities and to financial institutions in certain circumstances.

Our firm is sending you this communication to provide you with some general information regarding the new reporting rules as well as initial steps you should take to address the implications of the CTA to your organization. This communication is substantially similar to the email we distributed on February 15th, 2024. 

Take Immediate Action

As the CTA is not a part of the tax code, the assessment and application of many of the requirements set forth in the regulations, including but not limited to the determination of beneficial ownership interest, may necessitate the need for legal guidance and direction. As such, since we are not attorneys, our firm is not able to provide you with any legal determination as to whether an exemption applies to the nature of your entity or whether legal relationships constitute beneficial ownership. 

We strongly encourage you to reach out as soon as possible to legal counsel with expertise in this area to assist your organization with the steps you need to take to ensure compliance with the CTA, if applicable. Please be mindful of the reporting deadlines outlined below. 

Reporting Deadlines

As currently promulgated, the CTA’s reporting deadlines are as follows:

• All existing Reporting Companies — those formed or registered before January 1, 2024 — must report required information no later than January 1, 2025.
• All new Reporting Companies formed or registered on or after January 1, 2024, and before January 1, 2025, must report required information within 90^[1] calendar days after their formation or registration.
• All new Reporting Companies formed or registered on or after January 1, 2025, must report required information within 30^[2] calendar days after their formation or registration.
• Updated BOI reports are due within 30 calendar days after a change occurs.
• Corrected BOI reports are due within 30 calendar days after the Reporting Company becomes aware of, or has reason to know of, an inaccuracy.

Refer to FinCEN’s Frequently Asked Questions document (https://www.fincen.gov/boi-faqs) or to the FinCEN Reference Materials (https://www.fincen.gov/boi/Reference-materials) for detailed information and updated guidance regarding deadline changes that may be promulgated.

What Entities Are Subject to the New CTA Reporting Requirements?

Entities required to comply with the CTA (“Reporting Companies”) include corporations, limited liability companies (LLCs), and other types of companies that are created by a filing with a Secretary of State (“SOS”) or equivalent official. The CTA also applies to non-U.S. companies that register to do business in the U.S. through a filing with a SOS or equivalent official. Since the definition of a domestic entity under the CTA is extremely broad, additional entity types could be subject to CTA reporting requirements based on individual state law formation practices.

There are a number of exceptions to who is required to file under the CTA. Many of the exceptions are entities already regulated by federal or state governments and as such already disclose their beneficial ownership information to governmental authorities. 

Another notable exception is for “large operating companies” defined as companies that meet all of the following requirements:

• Employ more than 20 full-time employees in the U.S.
• Gross revenue (or sales) over $5 million on the prior year’s tax return
• An operating presence at a physical office in the U.S.

Who is Considered a “Beneficial Owner” of a Reporting Company?

A beneficial owner is any individual who, directly or indirectly, exercises “substantial control” or owns or controls at least 25% of the company’s ownership interests. 

An individual exercises “substantial control” if the individual (i) serves as a senior officer of the company; (ii) has authority over the appointment or removal of any senior officer or a majority of the board; or (iii) directs, determines, or has substantial influence over important decisions made by the Reporting Company. Thus, senior officers and other individuals with control over the company are beneficial owners under the CTA, even if they have no equity interest in the company. 

In addition, individuals may exercise control directly or indirectly, through board representation, ownership, rights associated with financing arrangements, or control over intermediary entities that separately or collectively exercise substantial control. 

CTA regulations provide a much more expansive definition of “substantial control” than in the traditional tax sense, so many companies may need to seek legal guidance to ultimately determine who are deemed beneficial owners within their organization. 

FINCEN BOI Toolkit and Filing Information

 To help you understand the new beneficial ownership reporting requirement, FINCEN has provided the following toolkit as a resource to educate business owners. 

• FINCEN BOI Toolkit – https://www.fincen.gov/boi/toolkit

See below for additional links to help provide guidance to businesses regarding how to file and submit BOI reports. 

• FINCEN BOI Homepage – https://www.fincen.gov/boi/toolkit 
• FINCEN BOI E-Filing Website – https://boiefiling.fincen.gov/boir/html

Note that penalties for willfully violating the CTA’s reporting requirements include (1) civil penalties of up to $591^[3] per day that a violation is not remedied, (2) a criminal fine of up to $10,000, and/or (3) imprisonment of up to two years.

For additional information regarding the beneficial ownership reporting requirements under the CTA, refer to FinCEN’s Frequently Asked Questions document at https://www.fincen.gov/boi-faqs. 

 As always, please feel free to contact us if you have any questions. 

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^[1] FinCEN issued a final rule on November 29, 2023, extending the deadline for companies created or registered in 2024 to file initial beneficial ownership information (BOI) reports to 90 calendar days after their formation or registration (was originally 30 days).  

^[2] Based on FinCEN guidance as currently promulgated, reporting companies created or registered on or after January 1, 2025, will have 30 calendar days from the company’s formation or registration to file their initial BOI report with FinCEN.

^[3] The penalties for BOI reporting violations have been inflation adjusted and are increased to $591 a day from $500, effective January 25, 2024.