Corporate Transparency Act

In 2021 Congress passed the Corporate Transparency Act (CTA), and as of January 1, 2024, this law requires that both new and existing businesses submit beneficial ownership information (BOI) to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).

Under the CTA, entities created by the filing of a document with a Secretary of State, including corporations and limited liability companies, must file a BOI report with FinCEN unless they qualify for an exemption. There are 23 exemptions, generally in the nature of governmental authorities, banks, broker or dealers of securities, insurance companies, public accounting firms, public utilities, certain tax-exempt entities, large operating companies and companies that are inactive as defined by the statute. To qualify as a large operating company the entity must; (i) employ 20 full time employees in the United States, (ii) have an operating presence at a physical office within the United States, (iii) and have filed in the previous year a federal income tax return in the United States demonstrating more than $5,000,000.00 in gross receipts or sales. Unless an entity qualifies for an exemption, it must file a BOI report with FinCEN.

An entity that must submit a report is required to submit information about the company and its beneficial owners. A beneficial owner is an individual who exercises substantial control over the company, or who owns or has control over at least 25% of its ownership interests. There can be one or more beneficial owners, and the report for each owner must include the individual’s full legal name, date of birth and complete current residential or business address. There is also an obligation to upload a copy of each beneficial owner’s U.S. Passport, driver’s license or other government issued documentation. If the beneficial owner is another entity, the information to be reported will be that of the owners of the entity.  

The date by which a company has to file a BOI report varies. If the company existed on or before December 31, 2023, it must file its report by January 1, 2025. For companies that are formed on and after January 1, 2024, it must file its report within 90 days of registration. For companies that are formed after January 1, 2025, it will have 30 days to file its report. 

If there is any change in the information that was reported, the company must file an updated BOI report within 30 days of the change.  Once the initial BOI report has been filed, no subsequent reports are required unless a change of information needs to be reported, or a correction needs to be made with respect to information previously reported.

Failure to file a required BOI report may result in civil penalties up to $500.00 per day for as long as the violation continues, and criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000.00.

Attention to the requirements of this new law will be important to anyone who owns a business that was registered with any Secretary of State, or similar office under the laws of a State, or formed under the laws of a foreign country and registered to do business in the United States. If you have any questions or concerns regarding how this law may impact your business, please feel free to contact attorney Carl M. Porto II, Michael Amato or Michael Carbone.