The Corporate Transparency Act is here! Enacted as part of the Anti-Money Laundering Act of 2020, and effective January 1, 2024, the Corporate Transparency Act (the “CTA”) requires most privately held companies to report certain corporate beneficial ownership information (“BOI Reports”) to the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Reporting obligations will kick in before year end, so read on to make sure that you’re prepared to keep your company compliant!
Companies Subject to the CTA
The CTA imposes reporting obligations on any “reporting company” that does not fall within an exemption enumerated in the CTA. Reporting companies are entities that are either formed, or registered, in the United States via a filing submission to a Secretary of State or similar state office, and include:
- Corporations;
- LLCs;
- LPs;
- LLPs;
- LLLPs; and
- Business Trusts
The CTA excludes 23 categories of larger, regulated entities from the definition of reporting company, including companies registered with the Securities and Exchange Commission and “large operating companies” that (i) have more than 20 full time employees in the United States, (ii) maintain a physical, private office space in the United States, and (iii) have demonstrated at least $5,000,000 in gross receipts or sales on their previous year’s federal taxes.
Reporting companies that cannot claim an exemption must maintain current BOI Reports for the duration of their corporate existence, or until they can claim a reporting company exemption.
Reporting Obligations under the CTA
Reporting companies must file BOI Reports which disclose information about: the reporting company itself; its “beneficial owners”; and, if created or registered on or after January 1, 2024, its “company applicants.”
Identifying a company’s beneficial owners will likely be the most time-consuming part of preparing a BOI Report. “Beneficial owners” are individuals who, directly or indirectly, exercise substantial control over the reporting company or own or control 25% or more of the reporting company’s ownership interests. Depending on the ownership structure of the reporting company, however, determining who qualifies as a beneficial owner can be a complicated endeavor—especially for startups. Special consideration must be given to any variance in voting rights in the company’s securities and to unrealized equity interests in the reporting company, such as outstanding convertible notes, SAFEs, or warrants.
Reporting Deadlines
Reporting Companies must file a BOI Report in accordance with the following deadlines:
- For reporting companies formed prior to January 1, 2024: An initial BOI Report must be filed with FinCEN by January 1, 2025.
- For reporting companies formed in 2024: An initial BOI Report must be filed with FinCEN within ninety (90) days of the entity’s date of formation.
- For reporting companies formed on or after January 1, 2025: An initial BOI Report must be filed within thirty (30) days of the entity’s date of formation.
- For all reporting companies: Amendments and revisions to the Initial BOI report must be submitted within thirty (30) days of the applicable change to company’s BOI Report.
The CTA imposes both civil and criminal penalties for noncompliance with a company’s BOI reporting obligations. Connect with us or your current company counsel today to be sure you have everything you need to file quickly and correctly within your company’s allotted filing timeline.
