Corporate Transparency Act Now In Effect
CORPORATE TRANSPARENCY ACT NOW IN EFFECT
On January 1, 2024, a new federal anti-money laundering law, the Corporate Transparency Act (“CTA”), took effect. The new law will directly affect many of our clients who own interests in corporations, LLCs, limited partnerships, or other similar entities or who serve as senior officers, managers, managing members or general partners of such entities. It may also affect trustees of trusts holding interests in such legal entities.
The CTA is an important new law, and there are potentially significant civil and criminal penalties for failure to comply with its reporting requirements on a timely basis.
Most private business entities in existence before January 1, 2024 are required to register under the CTA. A “Reporting Company” has until the end of calendar year 2024 to file an initial “Beneficial Owner Report” with Financial Crimes Enforcement Network (“FinCEN”), a bureau of the United States Department of Treasury. Certain large operating businesses and highly regulated businesses may be exempt from the CTA.
Reporting Companies created or registered during 2024 must file a Beneficial Owner Report within 90 calendar days from actual or public notice that its creation or registration is effective to file its initial Beneficial Owner Report. A Reporting Company created or registered after 2024, will have just 30 calendar days to file its initial BOI report.
A Reporting Company’s Beneficial Owner Report includes information about the company and its “Beneficial Owners.“ Beneficial Owners are individuals, directly or indirectly, owning or controlling not less than 25 percent of the ownership interests of the Reporting Company and individuals who, directly or indirectly, exercise substantial control over the Reporting Company.
Each Beneficial Owner must provide FinCEN with sensitive personal information, including the individual’s physical residential address, date of birth, and a scanned copy of an information document, typically an unexpired passport or valid driver’s licenses.
In lieu of providing this personal information to a Reporting Company for inclusion in its Beneficial Owner Report, a Beneficial Owner may obtain a FinCEN Identifier. A FinCEN Identifier is a unique identifying number issued by FinCEN. An individual may obtain a FinCEN Identifier by providing their personal information directly to FinCEN. A Beneficial Owner may then provide the Reporting Company with the individual’s FinCEN Identifier. For reasons of privacy and to simplify ongoing compliance with the CTA we recommend a Beneficial Owner obtain a FinCEN Identifier. See: How to Obtain a personal FinCEN Identifier.
If there is any change to the information about a Reporting Company or its Beneficial Owners included in a Beneficial Owner Report the Reporting Company must file an updated BOI report no later than 30 calendar days after the date on which the change occurred. The same 30-day timeline applies to changes in information submitted by an individual to obtain a FinCEN identifier.
A helpful Small Business Guidebook is available at www.fincen.gov/boi/small-business-resources. This Guidebook can help you to understand your CTA compliance obligations, if any.
If you are a client of Kulzer & DiPadova, we can advise you on your obligations under the CTA, including whether your company is CTA exempt or, if not, whose information must be reported, by when and how. If you are not presently a client of the firm but would like our advice, please contact us to discuss whether and how we can assist you with your CTA compliance needs.
Be cautious regarding CTA compliance solicitations. You should not allow anyone to file a Beneficial Owner Report for your company or apply for a FinCEN Identifier for you unless you know the person or have otherwise confirmed their legitimacy.