Understanding Your Obligations Under the Corporate Transparency Act
As a courtesy to our valued clients—including those who have previously formed LLCs, corporations, partnerships, or have business interests connected to trusts and estates—we want to inform you about new reporting requirements that may affect you. If you are not involved with any entities that are subject to these requirements, you may disregard this message.
What Is the Corporate Transparency Act (CTA)?
The Corporate Transparency Act (CTA) was enacted as part of the Anti-Money Laundering Act of 2020. It requires most business entities to file a Beneficial Ownership Information (BOI) report with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). This measure aims to enhance transparency and combat illegal activities like money laundering and terrorism financing.
Who Must Report?
Under the CTA, reporting obligations apply to two main categories of companies:
Domestic Reporting Companies:
Corporations, limited liability companies (LLCs), and other entities created by filing official documents with a state secretary or similar office within the United States.
Foreign Reporting Companies:
Entities formed under the laws of a foreign country that have registered to do business in the United States by filing documents with a state secretary or equivalent office.
Are There Any Exemptions?
Yes, certain entities are exempt from the BOI reporting requirements. Specifically, 23 types of organizations do not need to file. These exemptions include:
Publicly Traded Companies that meet specific regulatory requirements.
Nonprofit Organizations, such as charities and religious institutions.
Certain Large Operating Companies that:
- Employ more than 20 full-time employees.
- Report revenues exceeding $5 million annually.
- Have an operating presence at a physical office within the United States.
Note: Small businesses with less than $5 million in revenue and fewer than 20 full-time employees will likely need to comply with the BOI reporting requirements.
Reporting Deadlines
Initial Reports
Existing Companies (formed or registered before January 1, 2024):
- Must file their initial BOI report by January 1, 2025.
New Companies (formed or registered between January 1, 2024, and December 31, 2024):
- Have 90 calendar days after receiving notice of their creation or registration to file the initial BOI report.
- The 90-day period begins from either the actual notice of creation or when public notice is provided by the state secretary or similar office, whichever comes first.
New Companies (formed or registered on or after January 1, 2025):
- Required to file their initial BOI report within 30 calendar days of receiving actual or public notice of their formation or registration.
Updated Reports
- Required when there are changes to previously reported information about the company or its beneficial owners.
- Must be filed within 30 calendar days after the change occurs.
Corrected Reports
- Necessary when previously reported information was inaccurate at the time of filing.
- Must be submitted within 30 calendar days after becoming aware of the inaccuracy.
What Information Must Be Reported?
For the Reporting Company:
- Legal Name and any trade names or “Doing Business As” (DBA) names
- Business Address of the company’s principal place of business.
- Jurisdiction of Formation or Registration, indicating where the company was established or first registered.
- Taxpayer Identification Number (TIN) or equivalent identification number.
For Each Beneficial Owner and Company Applicant (if required):
- Full Legal Name of the individual.
- Date of Birth.
- Residential Address (usually the individual’s home address).
- Identification Number from an acceptable document (e.g., driver’s license, passport).
- Image of the Identification Document from which the identifying number is taken.
How to File Your BOI Report
BOI reports must be filed electronically through FinCEN’s online portal:
Consequences of Non-Compliance
Failure to comply with the BOI reporting requirements can result in significant penalties:
- Civil Penalties: Fines of up to $500 per day for each day the violation continues.
- Criminal Penalties: Fines of up to $10,000 and imprisonment for up to two years.
- Personal Accountability: Senior officers of a non-compliant entity may be held personally responsible for the failure to file required reports.
Moving Forward with Your Obligations
Compliance with the CTA is crucial for avoiding severe penalties and ensuring your business operates within legal guidelines. We recommend reviewing these requirements carefully and taking appropriate action to meet your reporting obligations.
Disclaimer
This overview of the CTA reporting requirements is intended for general informational purposes only and does not constitute legal advice. Grant Morris Dodds, PLLC (“GMD”) is not acting as your or your company’s general legal counsel regarding the CTA and does not provide technical advice or prepare BOI reports. We are providing this information solely as a public service.
If you have any questions or need further assistance, please feel free to contact us.