THE CORPORATE TRANSPARENCY ACT REPORTING REQUIREMENTS FOR BUSINESSES

October 7, 2024

The Corporate Transparency Act (“CTA”) was enacted on January 1, 2024 and imposes federal reporting regulations on many small businesses. The CTA is a law designed to help prevent money laundering and other financial crimes and requires certain business entities to disclose information about the entity and its owners to the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”).

The CTA affects many closely-held businesses, such as limited liability companies (LLCs), limited partnerships, and corporations. This law is very broad, and it even applies to entities designed only to hold property such as real estate even though they do not conduct any active business.

What Companies are Subject to the CTA’s Reporting Requirements?

The CTA requires certain business entities defined as a “domestic reporting company” to file a “beneficial ownership information” (“BOI”) report with FinCEN. A “domestic reporting company” is broadly defined as any corporation, limited liability company, or similar entity that was created by filing documents with the Secretary of State. The CTA specifically targets smaller business entities, but some entities may be exempt from filing a BOI report (see http://www.fincen.gov/boi for more information about the exemptions).

The BOI report includes the following business information:

Entity’s legal name and any trade name
Street address of the principal place of business
State where the entity was formed
Entity’s IRS taxpayer identification number
Identifying information about each “beneficial owner”

A “beneficial owner” of an entity is an individual who owns or controls more than 25% of the entity and/or has substantial control over the entity (President, CEO, senior officers, etc.).

The BOI report includes the following information about each of the entity’s beneficial owners:

Full legal name
Date of birth
Complete current address
Unique identification number from state-issued driver’s license or US passport, and copy of same

When are BOI Reports Required to be Filed?

If the business entity was created before January 1, 2024, the BOI report must be filed with FinCEN by January 1, 2025.

If the business entity was created after January 1, 2024, the BOI report must be filed with FinCEN within ninety (90) days of the entity’s creation.

For business entities created after January 1, 2025, the BOI report must be filed with FinCEN within thirty (30) days of the entity’s creation.

How often are BOI Reports Filed?

Once the initial report is filed, there is no requirement to file additional reports unless there is any change to the required information about the entity and/or its beneficial owners (change of address, death of owner, new owner, etc.) Updated reports are required to be filed with FinCEN within thirty (30) days of the change.

How are BOI Reports Filed?

BOI reports should be filed via FinCEN’s website (http://www.fincen.gov/boi). There is no fee for filing the report, but the government can impose civil and/or criminal penalties for non-compliance.

For a five minute video on how to file the BOI report visit the following link (https://www.youtube.com/watch?v=GydCvfbKxPw)

CKDBP is not currently assisting with filing of BOI reports. Due to the broad reach of the CTA regulations, there is concern in the legal community that filing these reports for our clients may create an ongoing obligation to file updated reports if any of the required information should change. CKDBP could potentially be at risk for significant non-compliance penalties if our clients do not keep us informed of changes to their entities.

If you wish to have professional assistance with filing this report, we recommend Wolters Kluwer (https://www.wolterskluwer.com/en/know/bfi-beneficial-ownership-filing-today) or CSC Global (https://www.cscglobal.com/service/business-administration/transactional-filings/corporate-transparency-act/#section1)

For more information, review FinCEN’s Small Entity Compliance Guide (http://www.fincen.gov/boi/small-entity-compliance-guide) and Frequently Asked Questions (http://www.fincen.gov/boi-faqs).