Beginning January 1, 2024, the Corporate Transparency Act (the “Act”) went into effect. Under the Act, all entities formed or registered to do business in the United States will either need to:
- Confirm they qualify for an exemption from the Act’s reporting requirements; or
- Timely submit a beneficial ownership information report to the U.S. Treasury’s Financial Crimes and Enforcement Network (“FinCEN”).
What does the Act require?
The Act requires certain companies to report information to FinCEN regarding the identities of their beneficial owners, which include persons who own at least 25% of the company and persons who exercise substantial control over the company. Entities which are formed on or after January 1, 2024, will also be required to report information about “company applicants”, defined as those who directly make the filing to form the entity with the Secretary of State and the person who oversees the filing.
What entities will be affected?
Entities required to report to FinCEN (“reporting companies”) include corporations, LLCs, and other entities that are created by a filing with the Secretary of State, and that do not fall within an exemption. Exemptions generally include regulated companies that report under other law, and as well as “large operating companies” having all of the following: more than 20 employees, a physical office in the United States, and reported United States revenue of more than $5 million.
When must reporting companies fulfill the requirements imposed by the Act?
Pursuant to 87 Fed. Reg. 5909, reporting companies must take steps to ensure compliance with the Act and file the relevant report with FinCEN within the following time frames:
- Within 90 days for entities formed between January 1, 2024 and January 1, 2025.
- Within 30 days if the company is formed or registered on or after January 1, 2025.
- By January 1, 2025, if the company was formed or registered prior to January 1, 2024.
- Within 30 days of changes in either the beneficial ownership of the reporting company, or of the information about those beneficial owners.
What are the penalties for failing to comply with the Act?
Penalties for willful violation of the Act include fines of up to $500 per day of non-compliance and/or imprisonment for up to two years.
The Act is new and is continuing to develop; however, to help guide businesses through the process, FinCEN has released some guidance, which can be found at: www.fincen.gov/boi. Please use the contact form below with any questions or for assistance to ensure that your business complies with the Act. Not only can we guide businesses to navigate through the requirements of the Act, but we can assist in determining what requirements apply to your business and in preparing and submitting any necessary filings on your behalf.