A new federal reporting mandate became effective on January 1, 2024. The Corporate Transparency Act (CTA) requires “Reporting Companies” to report personal identifying information about the individuals who are “Beneficial Owners” and “Company Applicants” to the Financial Crimes Enforcement Network (FinCEN), a unit of the U.S. Department of the Treasury. FinCEN will maintain information gathered on a secure, non-public database for use by governmental authorities, certain financial institutions and financial regulators. This new requirement applies to limited liability companies, corporations, real estate holding companies, and more. All entities registered with a Secretary of State, which are not exempt from registration under the CTA, are now required to make these mandatory reports. Failure to file these reports can result in serious civil and criminal penalties. This new federal report is in addition to, and not in place of, the annual reports customarily filed by entities with Secretary of State offices.
Generally, 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. Each Beneficial Owner of the Reporting Company must provide their full legal name, date of birth, current residential address, governmental identification information from a passport or driver’s license, and a copy of that identification document to FinCEN.
While some entities are exempt from the CTA beneficial ownership reporting requirements, many of the exemptions apply to companies in industries that are already heavily regulated (e.g. securities, banking, insurance), or to large companies. Tax exempt non-profit corporations are expressly exempt from CTA beneficial ownership reporting requirements.
Reporting Requirements
Each Reporting Company must complete and file its initial report (BOI Report) online with FinCEN using the form that is accessible from the FinCEN website. Reporting Companies also have an ongoing obligation to timely update reporting information with FinCEN. There is no filing fee associated with the online filing of a BOI Report.
Reporting Deadlines
Non-exempt entities created on or after January 1, 2024 have 90-days to file their initial BOI Report. All non-exempt entities existing on or before December 31, 2023 have the entire 2024 calendar year to file their initial BOI Report.
Next Steps
Don’t wait! All entities should review the requirements of the CTA and assess whether they are exempt from reporting. If reporting is required, Reporting Companies should file before the deadline to avoid penalties.
Visit FinCEN.gov for reporting information and the latest updates on Beneficial Ownership Information reporting.
The transactional lawyers at Sheehey are prepared to assist our clients with questions about these new federal reporting obligations.
