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Corporate Transparency Act
On January 1, 2024, the Beneficial Ownership Information Reporting Rule of the Corporate Transparency Act will go into effect. This rule will require many entities to file and maintain reports with the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) disclosing their beneficial owners and company applicants. Click here for a link to the Act.
To Whom does the Act apply? Not all entities will be subject to this rule. Only those entities which were created or registered to do business in the United States by filing with the secretary of state or similar office in the state of incorporation are considered “reporting companies.” Additionally, there are 23 specific exemptions that, if applicable, relieve a reporting company of its obligation to report its beneficial ownership information. Notable exemptions that may apply are exemptions for “large operating companies” and “tax-exempt entities.” The exemptions can be found at §5336(a)(11)(B) on page 4 of the Act.
If my company is not exempt from reporting, what do I have to do? If a reporting company is not exempt, it will be required to report its beneficial owner information to FinCEN.
Who qualifies as a “beneficial owner” and a “company applicant”? Beneficial owners are defined to be any individual who, directly or indirectly, exercises substantial control over a reporting company or owns or controls at least 25 percent of the ownership interest of a reporting company. Additionally, reporting companies created or registered in the U.S. after January 1, 2024 will be required to report their “company applicants,” meaning the individuals that physically file the formation or registration documents with the state.
What if the ownership of my company changes? All information reported to FinCEN in a beneficial ownership information report must be maintained and updated. Any changes will be required to be updated within 30 days of the applicable change. If a reporting company fails to submit a beneficial ownership information report, civil and criminal penalties may be imposed.
When do I actually have to file? FinCEN will begin accepting beneficial ownership information reports on January 1, 2024. For reporting companies that existed or were registered to do business in the United States prior to January 1, 2024, beneficial ownership information will not be due for filing until January 1, 2025. For reporting companies that are created or registered to do business in the United States in 2024, the reporting company’s beneficial ownership information report will be due for filing with FinCEN within 90 days of the reporting company’s creation or registration to do business in the United States. For reporting companies that are created or registered to do business in the United States on or after January 1, 2025, the reporting company’s beneficial ownership information report will be due for filing with FinCEN within 30 days of the reporting company’s creation or registration to do business in the United States.
Where do I file? Reports will be required to be submitted at https://www.fincen.gov/boi.
Written By:
Emily B. Irwin
Jordan Philley Saylor
