The Corporate Transparency Act: What You Need to Know

Dear Clients,

On January 1, 2024, the Corporate Transparency Act (CTA) went into effect impacting businesses across the board. The CTA requires most business entities to disclose beneficial ownership information to the US Treasury’s Financial Crimes Enforcement Network. Businesses who fail to comply could incur hefty fines and/or even imprisonment for willful violations.

The Brinkley Morgan Corporate Law and Development team is here to assist with any required filings under the CTA. We can guide you through these new reporting requirements. Please see below a helpful background and guide on the CTA and what is required of business owners.

We are here to guide you through this process and filing. Please contact Brinkley Morgan attorney Benjamin Sunshine.

Many thanks,

Brinkley Morgan Corporate Law and Development Team

Overview and What Entities are Subject to the New CTA Reporting Requirements

The Corporate Transparency Act (“CTA”) requires “reporting companies” to file a beneficial ownership information report (“BOI Report”) with the Financial Crimes Enforcement Network (“FinCEN”).  The CTA defines “reporting companies” as domestic entities created by the filing of a document with a secretary of state and foreign entities that registered to do business in the United States.  Such entities include corporations, limited liability companies, and other types of entities, such as general partnerships, limited partnerships, and limited liability partnerships.

However, there are over 20 types of businesses that are exempt from the CTA’s reporting requirements, which includes publicly traded companies, banks, and insurance companies.  Another notable exception is for “large operating companies” defined as companies that meet all of the following: (a) employ at least 20 full time employees in the United States; (b) gross revenue (or sales) of over $5 million in the prior year’s tax return; and (c) operating presence at a physical office in the United States.

What Information Will Be Reported

Reporting companies are required to provide the following information in its initial BOI Report: (a) full legal name; (b) trade name or d/b/a names; (c) address of the entity; (d) the jurisdiction of formation or registration; and (e) the federal taxpayer identification number.

In addition, the BOI Report must also provide information regarding the reporting companies’ “beneficial owners.” Such information includes: (a) full legal name; (b) birthdate; (c) home address; (d) an identifying number from a driver’s license, passport, or other approved document; and (e) an image of the approved document that contains the identifying number.  A beneficial owner is an individual who, directly or indirectly exercises “substantial control” or owns or controls at least 25% of the company’s ownership interests.  Substantial control means individuals who: (a) serve as a senior officer of the company; (b) have appointment or removal authority over the senior officers and board of directors; (c) can direct, determine, or have substantial influence over important decisions within the company; and (d) have any other type of substantial control over the company.

Lastly, the CTA requires reporting companies to provide identifying information for the “company applicants” of the reporting company.  Such information includes: (a) the individual who is responsible for filing the formation documents; or (b) the individual who is responsible for directing the filing of formation documents.

Deadlines
Existing reporting companies that were formed before January 1, 2024, must file their initial BOI Report no later than January 1, 2025.  Newly formed reporting companies created after January 1, 2024, must file their initial BOI Report within 90 calendar days of receiving actual or public notice that its creation or registration is effective.  If the reporting company is formed after January 1, 2025, it must file their initial BOI Report within 30 calendar days.  After the initial filing, there is no annual or quarterly filing requirement.  However, reporting companies have 30 days to amend their report to include updated information, such as a change of ownership or officers, and correct inaccurate information previously filed within 30 days of discovering the error.