Corporate Transparency Act

The New Law

Who is subject to the CTA reporting requirements?
Unless exempted, all companies are subject to the CTA’s reporting requirements.  Reporting companies generally are (1) domestic companies, including any corporation, limited liability company, limited partnership or similar entity created by filing a document with any U.S. state, territory or Indian tribe; and (2) foreign companies, which include any non‑U.S. entity that registers to do business with any U.S. state, territory or Indian tribe.  In general, trusts are not themselves reporting companies, unless they are created by a filing, like a business trust. The CTA, however, provides 23 types of exemptions to the reporting requirements, including for governmental entities, publicly traded companies, banks, financial institutions, and large operating companies.  An entity that qualifies under any of these 23 exemptions will not need to file a beneficial owner information report (or BOIR), unless the company later becomes nonexempt.  At your request, we will send you a list of the types of entities that are exempted from the reporting requirements and a questionnaire to help you determine whether your company satisfies one of the exemptions.

Information to be Reported

A reporting company must disclose the following information in the BOIR:

• full legal name of the reporting company;
• any trade names or DBAs, whether or not formally registered;
• current address of (x) the principal place of business, if in the U.S.; or (y) the primary location in the U.S.;
• jurisdiction of formation; and
• IRS taxpayer identification number.

A reporting company must also identify each of its beneficial owners.  A beneficial owner is any individual who, directly or indirectly, either (1) owns or controls at least 25% of the ownership interests in the company (ownership interests include equity, stock, voting power, options, and other mechanisms used to establish ownership); or (2) exercises substantial control over the reporting company.  “Substantial control” encompasses individuals who (i) serve as a senior officer of the reporting company, (ii) have appointment or removal authority over the senior officers and board of directors, (iii) can direct, determine, or have substantial influence over important decisions within the company, or (iv) have any other type of substantial control over the company.  A beneficial owner can both be a 25% owner and an individual who exerts substantial control over your company.  At your request, we will send you a worksheet to help you determine the beneficial owners of your company.

For every beneficial owner, the beneficial ownership information must include:

• full legal name;
• date of birth;
• complete current address;
• nonexpired identification document (e.g., U.S. passport, state, local government or Indian tribal ID, state‑issued driver’s license, or foreign passport); and
• an image of the identification document.

Reporting companies and beneficial owners can also apply for a FinCEN identifier in lieu of providing the above information.  A FinCEN identifier could facilitate easier reporting for reporting companies, provide additional privacy/protection for individuals and allow for fewer updated reports to be filed by reporting companies.  For an individual beneficial owner who wishes to obtain a FinCEN identifier, the individual must establish a Login.gov account and submit a FinCEN identifier application by providing the above information via the online form.  The individual will immediately receive the FinCEN identifier that is unique to that individual.  For a reporting company that wishes to obtain a FinCEN identifier, the reporting company may request the FinCEN identifier by checking a box on the BOIR when they submit the report.

Timing of the Filings

Initial Reporting
Under the CTA, reporting companies formed before January 1, 2024 will have until January 1, 2025 to file their initial beneficial owner information report with FinCEN.  Reporting companies formed on or after January 1, 2024, and before January 1, 2025, must file their initial report within 90 days of the company’s formation.  Reporting companies formed on or after January 1, 2025 must file their initial report within 30 days of the company’s formation.

How to File a Report
A BOIR must be filed electronically through the BOI E-Filing System that is available at boiefiling.fincen.gov/fileboir.  Currently, FinCEN provides two ways to file the BOIR: (i) Offline PDF BOIR; and (ii) Online BOIR.  The offline PDF BOIR will require the individual to have access to Adobe Reader, whereas the online BOIR does not.  The offline PDF BOIR can be downloaded at boiefiling.fincen.gov/0e4c60373481dbc66bbf.pdf.

Updates and Correction to Reports
Reporting companies are required to update their reports within 30 days after any change in the information previously provided to FinCEN about the reporting company or its beneficial owners.  Examples are a change in the company’s address or a change in a reporting company’s status to becoming an exempt entity.  If the reporting company becomes aware or has reason to know that any information in its previously filed report was inaccurate when filed, it must file a corrected report within 30 days to correct all of the inaccuracies.  The CTA includes a safe harbor if a corrected report is filed within 90 days after the date on which an inaccurate report is filed.

Penalties for Non‑Compliance
Non‑compliance with the CTA and/or willfully providing false or misleading information as a part of a report can result in civil penalties up to $500 per day (with a maximum fine of $10,000) and/or criminal penalties including imprisonment for up to two years in federal prison.  Individual employees who prepare and submit reporting information may be held personally liable for false reports.

Steps to Take Now
At the current time, we would recommend you take the following steps:

• Determine whether your company qualifies for an exemption.
• If your company is not exempt from the reporting requirements, identify each beneficial owner of your company and gather all required information from such individual.
• Develop a system for monitoring, updating and correcting beneficial ownership information regularly.

If you have any questions about this Client Alert, or require assistance in making the necessary filing, please email us at cta@certilmanbalin.com.  Of course, feel free to also contact the attorney at the firm with whom you normally deal.  You will be referred to an attorney in our Corporate/Securities Group who will be able to provide assistance.  For more information, please also visit FinCEN’s FAQs and Reference Material on the CTA.

Contact Our Corporate Securities Group

To discuss how the new law and rules apply to your company and to assist you in connection with your obligations under the CTA, please contact:

cta@certilmanbalin.com

The attorneys in our Corporate/Securities Practice Group offer a full range of business and securities law services. Our clients include businesses, emerging companies, real estate limited liability companies, and publicly-traded corporations.