Corporate Transparency Act 2024 | Understanding the CTA

In this article, we’re going to cover the Corporate Transparency Act 2024. The CTA is in effect! The CTA was implemented on January 1, 2024. What is this act all about? The United States Treasury Department’s Financial Crimes Enforcement Network – quite a mouthful! – or FinCEN is behind the CTA. It requires that certain business entities disclose key information about their business. 

All business entities that are beholden to the CTA have to file a Beneficial Ownership Information Report (BOI). The BOI has to be filed by the first day of the year 2025. This applies to entities that were formed or registered to conduct business in the US prior to the first day of 2024. 

If you’ve formed or registered your business entity in the US on January 1, 2024 and/or up until January 1, 2025, you’ll have to file the BOI within 90 (calendar) days of that formation/registration. 

For those who’ve formed/registered after January 1, 2025 – the BOI needs to be filed within 30 days. 

What Business Entities Are Impacted by the CTA?

Now, you may be curious as to which entities are affected by the CTA. The requirements of the act are applicable to what the CTA deems “reporting companies.” That is, any domestic/foreign corporation, limited liability company (LLC), or other entity formed/registered in the US. If you’ve formed or registered by filing documents with the secretary of a given state, or office-equivalent under state or tribal law – the CTA applies to you. 

Alright, so, any reporting company will have to share specific information. The details required are as follows: 

• The legal name and any other names of the reporting company, such as a “doing business as” name. 
• The current street address of the business in the United States. 
• The jurisdiction of the registration and formation of the business. 
• The Taxpayer Identification Number (TIN) of the business. 

The CTA also requires beneficial owners or company applicants to submit: 

• Legal name in full. 
• Official date of birth. 
• Residential address and/or business address. 
• Either an identifying number from a valid passport (US issued), other identification document (US issued), or a valid passport issued by a foreign country. 
• A scanned copy of the aforementioned valid document. 

How Business’ Information Will Be Shared | Privacy Concerns

That’s a lot of detailed information! Business owners should know that FinCEN has strict provisions in the CTA that state how the information you submit will be protected and shared. Financial institutions can request the information with a reporting company’s consent. The Treasury Department can request the information for tax administration. Federal agencies can access the information. Federal regulators and agencies may, as well, if/when they are regulating financial institutions. Law enforcement may access the information, if they have court authorization and are conducting a criminal or civil investigation. Likewise, foreign law enforcement can request the information. 

Defining Beneficial Owners/Company Applicants | Corporate Transparency Act 2024

Let’s address how the CTA defines a “beneficial owner.” With regard to reporting companies, a beneficial owner is an individual who has substantial control or who owns/controls 25% (minimum) of ownership interests. Substantial control is anyone who is a senior officer, has authority to decide on senior officers/board of directors, and/or anyone who has influence on major business decisions. Ownership interests cover equity, capital/profit interests, convertible instruments, and the like. 

There’s also that which the CTA calls a “company applicant.” These are individuals who (on/after January 1, 2024) form or register a reporting company in the US. If more than one person is connected to the filing of the business entity, the applicant is the one who is overall responsible. Any reporting company may have only two company applicants at most. That means, the individual who files the formation/registration, and/or the individual who directs/controls the filing. 

Adhering to Timelines | Submitting Updated BOI Reports…

What else does the Corporate Transparency Act 2024 require of business entities?! There are a set of timelines that you should be aware of. If the company or its beneficial owners change, that information has to be filed in the form of an updated BOI report. Entities have 30 days from any changes to submit that update. Similarly, a corrected BOI report has to be filed within 30 days of any known inaccuracy of information regarding the company/owners. Company applicant information changes, however, don’t need to be filed via a BOI report. 

You’ll want to avoid violating the terms of the CTA! Any kind of false or fraudulent information or failure to update your information can lead to a violation. This can cost at most $500 per day the violation continues to exist. And, if a criminal violation of the CTA occurs, the fine can be as high as $10,000, imprisonment (two years maximum), or both a fine and imprisonment. 

A great resource to consult when trying to navigate and understand these complex regulations and requirements is the FinCEN FAQ page. 

If you’ve got more questions about your business and the Corporate Transparency Act 2024, contact our team at Stockman & Poropat, PLLC today! The consultation is free! 

Up next we will be discussing Temporary Restraining Orders in Business.