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The Corporate Transparency Act – What You Need to Know Now

on Wednesday, 3 January 2024 in The Closer - M&A, Securities & Corporate Counsel: Kevin P. Tracy, Editor

What is The Corporate Transparency Act?

The Corporate Transparency Act (“CTA”) is landmark federal legislation that significantly impacts how privately held corporations, LLCs, LLPs, and other entities report ownership information to FinCEN, a bureau of the U.S. Department of Treasury.  The purpose of the CTA is to prevent financial crimes, such as money laundering, tax evasion and terror financing.  Reporting beneficial ownership information to FinCEN is a new mandate for U.S. entities effective January 1, 2024 (“Effective Date”).

Does the CTA apply to my company?

Yes, if your company is considered a “reporting company,” and no exemptions apply, then CTA compliance is required by federal law.  “Reporting companies” include corporations, LLCs, LLPs, and other entities created by filing official documents with a secretary of state or similar office.

The CTA exempts twenty-three types of entities from its reporting requirements, which broadly encompass entities that are already highly regulated (e.g., publicly traded companies, banks and other financial institutions, registered investment companies and investment advisers, insurance companies, specified tax-exempt entities).  In addition, large, U.S.-based operating companies (i.e., greater than 20 full-time employees and greater than $5 million in gross receipts or sales and physical presence in the U.S.) and limited inactive entities are exempt.  Because of the limited exemptions, we expect many private entities will need to comply with CTA.

If the CTA applies to one or more of my entities, what must be disclosed?

Reporting companies must provide information regarding itself and its “beneficial owners,” and for entities formed on or after January 1, 2024, the company’s applicant.  A “beneficial owner” is any individual who either (i) owns or controls at least 25% of the equity in the reporting company or (ii) exercises substantial control over the reporting company (including senior officers).

A reporting company must disclose the following information regarding itself:  full legal name, any trade names or “doing business as” (DBA) names, current address, jurisdiction of formation or registration, and tax identification number (TIN) or employer identification number (EIN).

A reporting company must disclose the following information regarding its beneficial owners (and if formed or registered after the Effective Date, its company applicant(s)):

  • Full name
  • Date of birth
  • Current residential address
  • A unique identification number from a non-expired identification document (i.e., a state-issued driver’s license, U.S. passport, a state or local government ID)
  • An image of the identification document supplying the unique identification number

When must the information be reported?

Date of Formation/Registration

Filing Deadline

Formed or registered on or after the Effective Date

Within 90 days of formation/registration

Formed or registered on or after January 1, 2025

Within 30 days of formation/registration

Formed or registered before January 1, 2024

Prior to January 1, 2025*

*On December 12, 2023, the U.S. House of Representatives passed the Protect Small Business and Prevent Illicit Financial Activity Act (HR 5119).  Such bill would, among other things, delay the CTA for existing companies to January 1, 2026.  The bill has been received by the U.S. Senate, read twice, and referred to the Committee on Banking, Housing, and Urban Affairs. 

In addition to the initial reporting requirements described above, reporting companies must continuously update or correct their reports within thirty days of any change in the reported information—such as changes to the company’s name, address or jurisdiction, and changes to beneficial ownership upon a transfer, issuance, or death. There is no materiality threshold for reporting changes; therefore, all changes currently require an updated filing with FinCEN.

Where is the information reported?

FinCEN intends to securely warehouse beneficial ownership information reported in a nonpublic database known as the Beneficial Ownership Secure System (“BOSS”).  Access to this data will be strictly controlled and granted on a case-by-case basis and will not be publicly available.  On January 1, 2024, BOSS became operational to the public for filings.  Companies may file themselves or may engage third parties to assist with filing on their behalf.  FinCEN has cautioned the public that there is fraudulent correspondence being circulated, and that reporting companies will not receive unsolicited requests from FinCEN.

Are there penalties for non-compliance?

Yes! Failure to report carries civil and criminal penalties. Willful non-reporting can result in a fine of up to $500 per day (capped at $10,000) and up to two years imprisonment.  Intentionally disclosing beneficial ownership information is subject to even more draconian penalties (i.e., $500 per day, capped at $250,000 and up to five years imprisonment). Failure by reporting companies to disclose correct information can also be penalized, and this can extend to individuals who influence the reporting company not to report, as well as senior officers of the reporting company in charge at the time of non-compliance.

What should we be doing now?

  • If you form an entity in 2024, file beneficial ownership information with FinCEN within 90 days
  • Gather information to identify beneficial owners, controlling persons, and company applicants
  • Train employees on CTA duties and responsibilities
  • Consider retention of third party providers to make filings with BOSS
  • Stay updated on reporting requirements as FinCEN releases additional guidance
  • Establish processes to collect ownership details for future reporting needs
  • Reach out to advisors with any questions or need for advice on reporting procedures and applicable exemptions

Where can I direct my questions?

You can reach any of our CTA Team as follows:

Michael Sullivan  Phone:  402.636.8312
Amber Preston  Phone:  402.636.8248
Eli Rosenberg Phone: 402.636.8295
Katie Kalkowski   Phone:  402.636.8307
Heather Shire, Paralegal    Phone:  402.231.8545


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