DON’T MISS THE DEADLINE TO FILE YOUR REPORTS UNDER THE CORPORATE TRANSPARENCY ACT!

POSTED NOVEMBER 13, 2024; LAST UPDATED DECEMBER 5, 2024

BY: MELISSA DEL VALLE, SENIOR LEGAL COUNSEL, AND AMANDA ALVARIÑO, UM LAW LEGAL EXTERN

BREAKING NEWS: ON 12/3/24, A TEXAS-BASED FEDERAL COURT ISSUED AN ORDER PROHIBITING THE FEDERAL GOVERNMENT FROM ENFORCING THE CTA ANYWHERE IN THE COUNTRY! “REPORTING COMPANIES” DO NOT NEED TO COMPLY WITH THE 1/1/25 DEADLINE. 

MAKE SURE YOU READ THE NEW LEGAL UPDATE, STAY INFORMED OF UPDATES IN THE LITIGATION, AND SIGN UP FOR THE NEXT WEBINAR.

 

What is the Corporate Transparency Act (CTA)?

The Corporate Transparency Act was enacted by Congress in 2021 to curb illicit finance. This law requires many companies who do business in the United States to report information regarding who owns or controls them. Effective January 1, 2024, “reporting companies” in the U.S. are required to report information about their beneficial owners and company affiliates to the Financial Crimes Enforcement Network (FinCEN), which is a part of the U.S. Department of the Treasury.

What is the deadline to report?

• December 31, 2024: Reporting companies created or registered before January 1, 2024.
• Within 90 days of creating a company: A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, must report beneficial ownership information within 90 calendar days after receiving actual or public notice that the company’s creation or registration is effective, whichever comes first.
• Within 30 days of creating a company: A reporting company created or registered on or after January 1, 2025, must file a Beneficial Ownership Information report within 30 calendar days from actual or public notice that the company’s creation or registration is effective.

Which companies are required to submit reports to FinCEN?

The Reporting Rule requires that all reporting companies file Beneficial Owner Information (“BOI”) reports with FinCEN.  There are two categories of reporting companies:

1. A company that is a corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe; or
2. A foreign company and was registered to do business in any U.S. state or Tribal jurisdiction by filing a document with a secretary of state or similar office of the State or Tribe.

If a company meets either definition (1) or (2) AND does not qualify for an exemption, the reporting company is required to file a Beneficial Ownership Information report with FinCEN.

Which companies are not required to report?

Twenty-three (23) specific types of entities are exempt from the reporting requirements.  An entity that qualifies for any of the listed exemptions is not required to submit Beneficial Ownership Information reports to FinCEN. Go to FinCEN’s Small Entity Compliance Guide which includes more information regarding the 23 exemptions and their requirements.

Who is a “beneficial owner”?

A beneficial owner is any individual who directly or indirectly exercises substantial control over a reporting company, or owns or controls at least 25 percent of the ownership interests of a reporting company. If an individual qualifies as a beneficial owner, information about that individual must be reported to FinCEN in the reporting company’s Beneficial Ownership Interest report.

Who is a company applicant and when is a company required to report company applicants?

A reporting company is required to report company applicants if it is either a:

• domestic reporting company created on or after January 1, 2024; or a
• foreign reporting company first registered to do business in the U.S. on or after January 1, 2024.

A reporting company is not required to report its company applicants if it is a domestic reporting company created before January 1, 2024, or a foreign reporting company first registered to do business in the U.S. before January 1, 2024.

There are two categories of company applicants: the first category is the direct filer and the second category is the individual who directs or controls the filing action.

• The direct filer must be identified by all reporting companies that have a company applicant reporting requirement.
• The individual who directs or controls the filing action is required to be reported when more than one individual is involved in the filing of the document that created or first registered the company.
• If more than one individual is involved in the filing, then two company applicants must be reported.
• No reporting company will have more than two company applicants.

How to report the required information?

Reporting companies can report Beneficial Ownership Information electronically through FinCEN’s website: www.fincen.gov/boi.

What happens if a reporting company fails to report beneficial ownership information in the required time frame? 

The willful failure to report complete or updated Beneficial Ownership Information to FinCEN or the willful provision of or attempt to provide false or fraudulent beneficial ownership information, may result in civil or criminal penalties.

What happens if you want to update or correct information previously filed with FinCEN?

Updated reports are required when there is a change to previously reported information about the reporting company itself or its beneficial owners. Updated reports are due within 30 calendar days after a change occurs. If an inaccuracy is identified in a report that was already filed, the company is required to submit a corrected report no later than 30 days after the date the company became aware of the inaccuracy or had reason to know of it.

Where can you find more information?

• BOI Brochure
• BOI Small Compliance Guide v1.1
• Beneficial Ownership Information Reporting
• BOI FAQs Q&A

 

DISCLAIMER: