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Corporate Transparency Act - Update

Starting January 1, 2024, the Corporate Transparency Act (“CTA”) may require your business entity to file a report with the Financial Crimes Enforcement Network (“FinCEN”) disclosing information about (1) the entity, (2) its Beneficial Owners (as discussed further below) and (3) for entities created or registered starting January 1, 2024, its Company Applicants (“BOI Report”). According to the government, tens of millions of entities will not qualify for an exemption and will need to start filing BOI Reports. Each entity that is registered with a U.S. state to do business, including foreign entities, will need to be analyzed to determine if it will be required to file a BOI Report.

Violations of reporting requirements include criminal penalties of up to $10,000 and/or possible imprisonment of up to two years, and civil penalties of not more than $500 per day.

The CTA was enacted in 2021 in an effort to reduce illegal financing activities in the United States. FinCEN is responsible for overseeing the implementation of the CTA and collecting and maintaining BOI Reports.

-  A “Beneficial Owner” is any individual who either, directly or indirectly, (i) owns or controls at least 25% of the entity or (ii) has substantial control over the entity, such as the entity’s executive officers (e.g., CEO, CFO, COO, etc.), and other key individuals.

- Company Applicant” means the person or persons who directly filed, or was primarily responsible for directing or controlling the filing of, the document that creates or registers the company.

Please note these key deadlines that were updated December 1, 2023:

1)   Any existing entity (created or registered before January 1, 2024) that does not qualify for an exemption must file a BOI Report no later than January 1, 2025.

2)   Any new entity (created or registered on or after January 1, 2024 but before January 1, 2025) that does not qualify for an exemption must file a BOI Report within 90 days after the entity’s formation date.

3)   Any new entity (created or registered on or after January 1, 2025) that does not qualify for an exemption must file a BOI Report within 30 days after the entity’s formation date.

NOTE: On December 12, 2023, the House passed HR 5119 which would, among other things, extend the timeline for existing entities to file a BOI Report from one to two years (i.e., no later than January 1, 2026). However, the bill has yet to be considered by the Senate, so entities should remain prepared to follow the deadlines outlined above.

Generally speaking, the information required in the BOI Report includes (without limitation):

1)   Information about your entity: its legal name, any trade names or dba names, the current street address of its principal place of business within the US, its jurisdiction of formation or registration, and its taxpayer identification number;

2)   Beneficial Owner Information: name, date of birth, residential address, and an identifying number from an acceptable identification document, such as a passport or US driver’s license; and

3)   Company Applicant Information: name, date of birth, address (residential address or, in the event of an attorney or corporate formation agent, a business address), and an identifying number from an acceptable identification document.

You must also submit a copy of the identification document (e.g., passport or US driver’s license) used for each Beneficial Owner and Company Applicant.

NOTE: There is a duty for your entity to update the BOI Report within 30 days after any change to your entity’s status or the information in the BOI Report, provided that information regarding the Company Applicant does not need to be updated so long as it is accurate as of the initial filing.  

Your Beneficial Owners or Company Applicants may opt to create a “FinCEN Identifier” and report their information to FinCEN directly. The creation and use of a FinCEN Identifier is subject to ongoing rulemaking.

FinCEN recently released additional guidance regarding the CTA, which you can access by going to https://www.fincen.gov/boi.

If you have any questions regarding the CTA or if we can be of any assistance please reach out to our firm.

Categories: Corporate
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