Corporate Transparency Act

The reporting requirements under the Corporate Transparency Act (“CTA”) came into effect on January 1, 2024, and will implement additional requirements for most United States business owners. The CTA was enacted by Congress in 2021 to combat money laundering, corruption and fraud. Starting January 1, 2024, companies that meet the definition of a “reporting company” will be required to report various information to the United States Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) and all information will be stored in a database maintained by FinCEN.

A “reporting company” can be either a domestic or foreign reporting company. A domestic reporting company generally is any entity that is a corporation, limited liability company, or created by filing a document with the secretary of state or an equivalent office under the law of any state. A foreign reporting company generally is an entity that is a corporation, limited liability company, and other entities that are created in a foreign country and are registered to do business in the United States or in any Tribal jurisdiction.

The CTA requires reporting companies, domestic and foreign, to report beneficial ownership information (BOI). A beneficial owner generally is an individual who directly or indirectly exercises substantial control over the reporting company, or an individual that owns 25% or more of the interests in the company. Information required to be reported about each beneficial owner includes the beneficial owner’s full legal name, date of birth, residential address, and ID number from a driver’s license, state identification card, or non expired passport. In addition to the BOI, the CTA requires reporting companies to report the full legal name of the company, the EIN for the company, the street address of the principal place of business, and any trade names or “DBA” names the company has.

In addition to the above information, reporting companies formed after January 1, 2024 are required to report the persons who participated in filing the entity’s formation documents and provide the same information required to be provided about beneficial owners. 

The CTA also implements a deadline for the required reports. All reporting companies that were formed before January 1, 2024 must file its initial report with FinCEN before January 1, 2025. All reporting companies formed on or after January 1, 2024 but before January 2025 must file its initial report with FinCEN within 90 days following the formation of the entity. All reporting companies formed on or after January 1, 2025 must file its initial report with FinCEN within thirty days following the formation of the entity. Any updates to initial reports must be filed within thirty days of the change.

The CTA is nuanced and contains many exceptions, but willful failure to comply with the reporting requirements and timely provide accurate information can result in monetary fines as well as criminal consequences. For more information about the CTA visit: https://www.fincen.gov/boi-faqs; https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide_FINAL_Sept_508C.pdf

This is a significant addition to the legal requirements imposed on businesses in the United States. If you have any questions and would like more guidance as to this issue, the attorneys at Hannah Sheridan & Cochran, LLP can assist you with all your business needs.