Act Now! CTA Reporting Deadline is December 31, 2024

As we had previously advised, the Corporate Transparency Act (CTA) went into effect on January 1, 2024 and requires all entities (unless an exemption applies) to make a beneficial ownership filing with the United States Department of the Treasury’s Financial Crimes Enforcement Network by January 1, 2025. We are currently assisting our business clients with making their filings on a first come first serve basis. If you need help making the filing, contact us as soon as possible.

What happens if I do not comply?

The CTA provides for civil and criminal penalties for violations, including a fine of up to $10,000, imprisonment for up to two years, or both, for any person who willfully provides or attempts to provide a false report, or fails to report complete or updated beneficial ownership information.

Common Misconceptions

Inactive Entity Exemption
You may think that you do not need to report because your company never conducted or no longer conducts business. Although there is an inactive entity exemption, it consists of 6 very specific requirements, all of which must be satisfied in order to rely on the exemption. The entity (a) must have been in existence when the CTA took effect on January 1, 2020, (b) cannot be engaged in active business, (c) may not be owned by a foreign person, (d) may not have had any change in ownership in the preceding 12-month period, (e) may not have sent or received any funds in an amount greater than $1,000 in the preceding 12-month period, and (f) may not hold any assets, including ownership interest in another entity. If a reporting company does not meet every one of the 6 prongs, it does not qualify for the inactive entity exemption.

Dissolved Entity
You may think that you do not have to report because you dissolved your entity this year. FinCEN recently released FAQs that establish that a reporting company in existence on or after January 1, 2024 must file a BOI report even if it later formally and irrevocably dissolved. Additionally, FinCEN notes that a company that is administratively dissolved generally does not cease to exist as a legal entity because it has limited continued existence under state law. Administratively dissolved reporting companies are therefore still under the obligation to file a BOI report.

What information must be reported?

Information regarding Beneficial Owners and Company Applicants
The report must identity the company’s beneficial owners. Beneficial owners include any person who either directly or indirectly exercises substantial control over the company (for example, senior officers, persons having authority over appointment or removal of such officers), or who owns or controls 25% or more of the ownership interests of the company.
For any entities formed after January 1, 2024, the identities of company applicants, including the Attorneys and Paralegal’s that assist in filing the formation document with the Secretary of State must be reported.

Reporting requires that the following information for each individual named above be filed with FinCEN:
• Full legal name;
• Date of birth;
• Complete current residential address of beneficial owners;
• A copy of an unexpired identification document (Passport or State Driver’s License).

Information regarding Company

The company must disclose the following information about itself on the report:
• Full legal name of the reporting company including any fictitious business names;
• Current physical address (corporate agent or P.O. Box addresses are not allowed);
• State of formation;
• IRS Taxpayer Identification Number.

When must the initial report be filed?

Entities in existence before January 1, 2024 have until January 1, 2025 to file an initial report. Entities created on or after January 1, 2024 have 90 days after its formation in which to file an initial report, however, as of January 1, 2024 they will only have 30 days in which to file.

When must an updated report be filed?

An updated report needs to be filed whenever the company information listed above changes, or whenever there are any changes to the beneficial owners of the company. That means if you change your company address, sell stock to a new shareholder or appoint a new senior officer, an updated report needs to be filed.