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Corporate Transparency Act

As of December 30, 2024:

A new panel of the U.S. Fifth Circuit Court of Appeals is reviewing the lower court’s decision to enjoin the enforcement of the beneficial ownership information reporting requirement. The review will be expedited, but in the interim, the new panel reversed the previous panel’s decision to allow the BOI reporting mandate to continue pending the court of appeal’s review.

As the law stands today (12-30-2024), penalties cannot be imposed against businesses that fail to file BOI reports with FinCEN.

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Understanding the Corporate Transparency Act

The Corporate Transparency Act (Act) is a federal law in the United States that requires domestic and foreign companies and LLCs to file a Beneficial Ownership Information Report (BOIR) with the U.S. Treasury Department Financial Crimes Enforcement Network (FinCEN). It is the first federal law in the United States to require most businesses to disclose their beneficial owners. The Act is expected to make it more difficult for criminals to hide their ownership of companies and use them to launder money or finance illegal activities. Now is the time to start preparing by reviewing the regulations and identifying your company’s beneficial owners.

Corporate Transparency Act Overview

What is a Beneficial Owner

A beneficial owner of a reporting company is an individual who, directly or indirectly, exercises substantial control over a reporting company. Examples of beneficial owners include:

  • Individuals who own more than 25% of a company’s ownership interests or shares
  • Individuals who have voting control over a company
  • Individuals who control a company through trusts, partnerships, or other legal entities
  • Individuals who have the power to direct or control a company’s management
  • Individuals who exercise substantial influence over a company’s financial decisions

It is important to note that beneficial owners can be individuals not publicly known as company owners.

Review FAQs for beneficial owner information reporting.

What information is required for the Corporate Transparency Act?

The BOIR, which will be filed electronically, will need to include the following information about the reporting company’s beneficial owners:

  • Full name
  • Date of birth
  • Current address
  • A unique identifying number, such as a driver’s license number or passport number

Review FAQs for beneficial owner information reporting.

When does a BOIR need to be filed?

The Corporate Transparency Act became effective on January 1, 2024. Filing timelines are below.

  • A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial BOIR.
  • A reporting company created or registered in 2024 will have 90 calendar days to file after receiving actual or public notice that its creation or registration is effective.
  • A reporting company created or registered on or after January 1, 2025, will have 30 calendar days to file after receiving actual or public notice that its creation or registration is effective.
  • Reporting companies must also file an updated BOIR within 30 days of any changes to their beneficial ownership information.
Who must report?

A reporting company is:

  • A domestic corporation, LLC, including a single member LLC, or an entity created by filing documents with a Secretary of State’s office or similar office (e.g., limited partnerships, limited liability partnerships, and business trusts in most states); and
  • A foreign corporation, LLC, or other entity formed under the law of another country and registered to do business in any state or tribal jurisdiction by the filing of a document with a Secretary of State or similar office. This includes documents filed with a Secretary of State (or similar office) for Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, the U.S. Virgin Islands, and any other U.S. commonwealth, territory, or possession.
    (Treas. Regs. §1010.380(c))

The vast majority of small and medium-sized businesses that form with a state’s Secretary of State’s office will be subject to the Corporate Transparency Act’s reporting requirements to FinCEN.

Who is not required to report?

The reporting rules do not currently apply to general partnerships or most trusts, large operating companies, or highly regulated companies. There are over 23 exemptions, a few of which include:

  • Publicly traded companies
  • Certain types of financial institutions
  • Nonprofit organizations
  • Government entities

Businesses should be aware of the Corporate Transparency Act’s requirements and exemptions.

What are the potential penalties for not complying with the Corporate Transparency Act?

The potential penalties for non-compliance with the Corporate Transparency Act are significant. Failure to comply with filing on time could result in civil penalties of $591 for each day the BOIR is late. If the failure to report is willful, or if the report knowingly includes erroneous information, individuals may also face criminal penalties of up to $10,000 and/or two years imprisonment.

In addition to the penalties noted above, companies that fail to comply may also face other negative consequences, such as difficulty obtaining financing, increased risk of regulatory audits and investigations, reputational damage, and difficulty attracting and retaining customers and employees.

Companies should develop a process for identifying and reporting their beneficial owners to ensure compliance with the Corporate Transparency Act.

Are there state-equivalent filing requirements?

There are currently no Corporate Transparency Act equivalent state filings that are required. However, some states are considering enacting beneficial ownership reporting laws.

Businesses should monitor developments in their state to determine whether they may be subject to any additional beneficial ownership reporting requirements in the future.

Please note, even if a state does not have a Corporate Transparency Act equivalent filing requirement, businesses may still be required to disclose beneficial ownership information to the state for other purposes.

Access to Information Reported to FinCEN

Even if a business is exempt from the Corporate Transparency Act’s reporting requirements, it may still be required to report beneficial ownership information to other government agencies.

The Corporate Transparency Act is intended to be a tool for law enforcement and financial institutions to combat money laundering, terrorist financing, and other financial crimes. FinCEN has stated that it will take steps to protect the confidentiality of collected information and ensure it is only used for legitimate law enforcement and financial regulatory purposes. Therefore, the following entities will have access to the Corporate Transparency Act information reported to FinCEN.

How to Prepare for the Corporate Transparency Act

Here are the steps Windes recommends all required businesses take to get started.

Review the Final Rules

Carefully review the final rules to understand your obligations. The Treasury Department has published final rules for the Corporate Transparency Act, which provide detailed guidance on the reporting requirements.

Identify beneficial owners

Identify all of your company’s beneficial owners and collect their required information, such as name, address, date of birth, and unique identifying number.

Frequently Asked Questions

The FinCEN website has a list of helpful FAQs. If you have further questions about the Corporate Transparency Act, Windes can assist.
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