CTA Beneficial Ownership Information reports due
The Corporate Transparency Act (CTA) went into effect on January 1, 2024, requesting every “Reporting Company” in the U.S. to file a Beneficial Ownership Information Report (BOI Report) with the Financial Crimes Enforcement Network (FinCEN).
The CTA and its regulations are voluminous. This serves as a reminder of some key details you need to be aware of.
Effective January 1, 2024, CTA Reporting Requirements Requires Information About Company Ownership
Congress enacted the CTA as part of the Anti-Money Laundering Act of 2020 to help prevent money laundering, terrorist financing, and other illegal activities. The rationale for the bill was that requiring a wider variety of business entities (which includes corporations, limited liability companies, most partnerships, and other forms of business entities) to increase the information they report to the federal government will curb the exploitation of such entities for criminal enterprises and assist law enforcement in uncovering criminal activity.
Who Must File
A “Reporting Company” is any corporation, limited liability company, or other entity that is either:
(1) created by the filing of a document with a secretary of state or any similar office under the law of a State or Indian Tribe or
(2) formed under the law of a foreign country and registered to do business in any State or tribal jurisdiction by the filing of a document with such an office.
Although the CTA exempts several entities from the definition of “Reporting Company” (e.g. large operating companies and those in highly regulated industries), the scope of the CTA is broad and will require the vast majority of small businesses and family entities to file a BOI Report.
Initial Deadline to file
Generally, entities formed before January 1, 2024 are required to file their initial BOI Report no later than January 1, 2025, and entities formed during 2024 are required to file their initial BOI Report within 90 days after the date of the entity’s formation.
For all entities formed on or after January 1, 2025, the BOI Report must be filed within 30 days of the date of the entity’s formation.
Extended Deadline for Certain Reporting Companies Impacted by Hurricane Milton
On Oct.29, 2024, FinCEN announced a 6-month extension of the filing deadline for certain Reporting Companies affected by Hurricane Milton.
To qualify for this extension, an entity must have a principal place of business located in an area designated both by the Federal Emergency Management Agency (FEMA) as qualifying for individual or public assistance and by the Internal Revenue Service (IRS) as eligible for tax filing relief as a result of Hurricane Milton.
Click HERE to learn if your Reporting Company is in a FEMA relief area.
Click HERE to learn if your Reporting Company is in an IRS relief area.
Note: This extension only applies to a Reporting Company that had an initial deadline to file a BOI Report on or between October 4, 2024 and January 2, 2025.
Penalties for Non-Compliance
The inadvertent failure to file a timely BOI Report can result in daily fines of “not more than $500” for each day that the violation persists after the due date. Willful failure to file the BOI Report can result in a fine of “not more than $10,000” and/or imprisonment for “not more than 2 years,” with enhanced penalties when failure is combined with other illegal activity.
What Information Needs to Be Reported
The BOI Report must disclose for its Company Applicant (unless the entity was created prior to January 1, 2024) and each Beneficial Owner:
• Full legal name, date of birth, and current residential address.
• Unique identifying number from a current passport, state or tribal identification document, or driver’s license, as well an image of such document from which the number was obtained.
Who is a Company Applicant?
A “Company Applicant” is the person who “directly files the document” that created or registered the Reporting Company and, if more than one individual is involved in filing the document, the individual who is primarily responsible for directly or controlling such filing.
Who is a Beneficial Owner?
A “beneficial owner” is any individual who, directly or indirectly, either exercises substantial control over the Reporting Company (such as officers, directors, managers, etc.) or owns or controls at least 25% of the ownership interest of such Reporting Company. Note the rules regarding beneficial owners in the context of trusts that own an interest in a Reporting Company are complex and not always well-defined.
FinCEN’s Beneficial Ownership Information (BOI) E-Filing System has been created so you may file your report online: https://boiefiling.fincen.gov/.
Where to Learn More
You can learn more about your compliance obligations by viewing FinCEN’s Small Entity Compliance Guide by clicking HERE, and FinCEN’s frequently asked questions by clicking HERE and HERE.
You are encouraged to address your filing obligations immediately, either on your own or with your CPA or other advisors. If you would like our assistance with fulfilling your CTA reporting obligations, you must contact your attorney at Dean Mead in writing as soon as possible, but no later than December 2, 2024 to ensure we can timely handle client requests.
Dean Mead will not file BOI Report(s) for your entities unless we receive a request in writing from you that identifies your specific Reporting Company/Companies and the information contained in “What Information Needs to be Reported” above.
Note: Although the CTA has been ruled unconstitutional by U.S. District Court Judge Liles C. Burke of the United States District Court for the Northern District of Alabama, this ruling does not currently relieve anyone outside of the Plaintiffs in that case from their obligations under the CTA. Learn more by clicking HERE.
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