What is the Corporate Transparency Act?
As of January 1, 2024, a new federal law known as the Corporate Transparency Act (“CTA”) requires all non-exempt corporations, limited liability companies, limited partnerships and other similar entities (referred to as “Reporting Companies”) to disclose beneficial ownership information (“BOI”) to the Financial Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Department of the Treasury.
Who Needs to Comply and When is the Deadline?
Entities in existence on or prior to December 31, 2023, are required to file the initial BOI report with FinCEN prior to January 1, 2025. Under the CTA, each Reporting Company is required to report to FinCEN certain information about its primary owners and individuals who have substantial control over the entity (each a “Beneficial Owner”) and the Reporting Company itself. Specifically, the Reporting Company must provide the name, date of birth, current address, and unique identification number, jurisdiction of issuance, and photocopy of an acceptable identification document, such as a passport or driver’s license, for each Beneficial Owner. This information is referred to under the CTA as BOI.
Entities that are formed after December 31, 2023, must file a BOI report within ninety (90) days of formation. This time period will be reduced to thirty (30) days in 2025.
Who is a Beneficial Owner?
Pursuant to the CTA, a Beneficial Owner includes any individual who owns or controls at least 25% of the ownership interest in the entity OR who directly or indirectly exercises substantial control over the entity, including an officer and director. The BOI report must be filed by the entity, which will need to certify the accuracy of the BOI information. Entities may file the BOI report directly with FinCEN on its website (www.fincen.gov) or can engage a third-party corporate support services vendor (such as CSC or Registered Agent Solutions) to do so.
What if a Business Undergoes a Future Change?
In addition to the initial BOI report, entities are required to report any future changes to the entity information (name, trade name, address, etc.), changes in beneficial ownership, and/or any changes to a Beneficial Owner’s personal information (including renewed driver’s license or passport) within thirty (30) days of the change.
What are the Consequences if a Business Fails to Comply?
Failure to timely file or update a BOI report can result in civil liability of $500 per day (up to $10,000 per violation) and criminal penalties of up to two years’ imprisonment. Stock and Leader can assist in identifying Beneficial Owners of an entity and whether an entity qualifies for any exemption to CTA’s reporting requirements. If you have any questions about the CTA or the obligations it imposes on your business, contact Stock and Leader’s Business Law Department at (717) 846-9800.