Corporate Transparency Act (CTA) 2024
Understanding the Corporate Transparency Act:
Enacted to combat money laundering, terrorism financing, and other illicit activities, the Corporate Transparency Act was signed into law with the National Defense Authorization Act for Fiscal Year 2021. The primary objective of the CTA is to enhance corporate transparency by requiring certain entities to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).
Key Provisions:
1. Beneficial Ownership Reporting:
The CTA mandates that certain corporations, limited liability companies (LLCs), and similar entities report their beneficial ownership information to FinCEN. This includes details about individuals who directly or indirectly control the entity, such as names, addresses, and identification numbers.
2. What is Substantial Control:
FinCEN provides that an individual can exercise substantial control over a reporting company in four different ways. If the individual falls into any of the categories below, the individual is exercising substantial control:
The individual is a senior officer (the company’s president, chief financial officer, general counsel, chief executive office, chief operating officer, or any other officer who performs a similar function).
The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company.
The individual is an important decision-maker for the reporting company. See Question D.3 for more information.
The individual has any other form of substantial control over the reporting company as explained further in FinCEN’s Small Entity Compliance Guide (see Chapter 2.1, “What is substantial control?”).
3. Exemptions and Thresholds
Some entities are exempt from reporting, such as publicly traded companies and those already subject to rigorous disclosure requirements. The CTA also sets monetary thresholds to determine which entities are covered, with exemptions for small businesses meeting specific criteria. Some of the exemptions recognized by FinCEN are as follows:
4. What Type of Information will Reporting Companies have to Provide?
According to FinCEN, a reporting company will have to report:
Its legal name;
Any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names;
The current street address of its principal place of business if that address is in the United States (for example, a U.S. reporting company’s headquarters), or, for reporting companies whose principal place of business is outside the United States, the current address from which the company conducts business in the United States (for example, a foreign reporting company’s U.S. headquarters);
Its jurisdiction of formation or registration; and
Its Taxpayer Identification Number (or, if a foreign reporting company has not been issued a TIN, a tax identification number issued by a foreign jurisdiction and the name of the jurisdiction).
A reporting company will also have to indicate whether it is filing an initial report, or a correction or an update of a prior report.
5. Where to File BOI Report?
Reporting companies will be required to file their reports electronically through the beneficial ownership secure system (BOSS) created by FinCEN. The system is available beginning on January 1, 2024.
6. Deadline to File
New businesses created on or after January 1, 2024 will have 90 days to report their ownership information. Businesses created prior to January 1, 2024 will have until the end of the year to file their reports.
7. Failure to File
Current FinCEN guidance provides that any company that fails to file a required beneficial ownership report or amendment by its filing deadline is subject to a fine of $500 per day, up to a maximum of $10,000.
8. Requirement to File Updated Reports:
If there is any change to the required information about your company or its beneficial owners in a beneficial ownership information report that your company filed, your company must file an updated report no later than 30 days after the date of the change.
A reporting company is not required to file an updated report for any changes to previously reported information about a company applicant.
More information can be found on FinCEN’s website by clicking here.