The Corporate Transparency Act (“CTA”) is a federal law that will go into effect on January 1, 2024. Unless a company is exempt from reporting (see below) all business entities formed in the U.S. will need to complete and file a beneficial ownership disclosure form (“BOI”) with the U.S. Treasury’s Financial Crimes and Enforcement Network (“FinCen”).
The CTA applies to all entities formed in the U.S. with several significant exemptions, including but not limited to: 1) entities that are already heavily regulated (like banks and insurance companies), 2) large companies with a physical U.S. office and more than 20 employees and more than 5 million per year in revenue, 3) certain tax exempt entities, 4) accounting firms and 5) public utilities. The CTA sets out twenty-three exemptions. In addition to those exemptions, entities that are not created through a filing at a state office do not have to comply with the CTA; those entities include trusts and general partnerships.
Companies created before January 1, 2024 will have an entire year to make the required filing. Entities that are created on or after January 1, 2024 must make the filing within thirty days (this timeline may be extended a month or two, this has yet to be finalized).
While FinCen has yet to provide an actual BOI form, it is generally understood from the CTA itself that the filing must identify anyone who owns or controls more than 25 % of the entity, and the company’s decision makers (senior officers and others with substantial control over the entity). For entities created after January 1, 2024, the person(s) directing or making the actual filings at the state level that create the entity must also provide their personal information. For each individual on the BOI the following information must be provided: 1) full legal name 2) address 3) date of birth and 4) passport or license number. A copy of the identifying document must accompany the filing. While the filings will be made electronically, this is not yet possible.
Penalties apply to individuals that have the responsibility to file a BOI and do not do it, or provide false information.
No. Each time any of the information on the BOI changes the company will have 30 days to report the changes. Every company should add CTA compliance to its compliance officers’ responsibilities and consider the many events that will trigger CTA filings: elections of officers, sales and transfers of stock or company ownership, address changes for individuals, replacement of identifying documents and more.
The BOI is not a public document, it is for law enforcement use.
The attorneys at Barna Guzy and Steffen Ltd (“BGS”) are continuing to monitor this new law and how it will impact their clients. Look for additional information on the CTA in current and future BGS blogs located on the firms website. Questions on the CTA may be directed to attorneys Carole Clark Isakson, Scott Hagel and Jacob LeVahn, or corporate paralegal Rachel Schwankl. Their contact information is also found on the BGS website.