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The Corporate Transparency Act (CTA) created new reporting requirements for companies created or registered to do business in the United States. Effective January 1, 2024, reporting companies will be required to provide information regarding the company and its beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Failure to comply with the new requirements will result in fines and potentially criminal charges.
Who Is a Reporting Company?
Under the CTA, any foreign or domestic company that is considered a reporting company is required to provide company information and beneficial ownership information. A reporting company is broadly defined as any corporation, limited liability company, or similar entity that is created or registered to do business in the United States by filing documents with a secretary of state or a similar office of a U.S. state or tribal government.
Companies required to report are called reporting companies. There are two types of reporting companies:
Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.
Who Is a Beneficial Owner?
Beneficial ownership information refers to identifying information about the individuals who directly or indirectly own or control a company. A beneficial owner is an individual who exercises “substantial control” over the reporting company, either directly or indirectly, or who owns or controls 25% or more of the reporting company’s ownership interests.
Filing the Report Deadline.
Reporting companies will be able to file reports beginning January 1, 2024. Reporting companies in existence prior to January 1, 2024, must file their reports by January 1, 2025. Reporting companies created on or after January 1, 2024, but before January 1, 2025, will be required to file a report within 90 days of the earlier of the date of creation or registration with their governing jurisdiction. Reporting companies created on or after January 1, 2025, will be required to an initial report within 30 days of the date of creation or registration. If there is a change to the reported information, reporting companies must submit updated reports reflecting such change within 30 days.
Reporting companies will be required to file their reports electronically through the beneficial ownership secure system (BOSS) created by FinCEN. The system will not be available until January 1, 2024. FinCEN has advised that further instructions and guidance on how to complete and file the BOI report form will be released in the future.
Penalties
Willfully providing false information or failing to report or update beneficial ownership information may result in significant penalties. The civil penalty for a violation is $500 per day, while criminal penalties include fines of up to $10,000, imprisonment for up to two years, or both. If a report is filed that contains inaccurate information and the reporting company did not have actual knowledge the information was incorrect, it will be given a 90-day safe harbor to submit an accurate report.
Please reach out if you need an assistance to file the report. Phone 678-780-8615
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