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A Short Guide on the Corporate Transparency Act

February 17, 2024 Business Entities and Transactions

The Corporate Transparency Act (CTA) is a new law that requires certain businesses to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). A beneficial owner is someone who owns at least 25% of the business or has substantial control over it, such as a Manager, President, CEO, CFO, or other executive with managerial authority. The CTA aims to prevent money laundering and other illicit activities by making it harder for criminals to hide behind shell companies.

Here is a short guide on how to deal with/register for the CTA:

  • Check if your business is exempt from the CTA. There are 23 types of entities that are exempt, such as publicly traded companies, banks, insurance companies, nonprofits, large operating companies,1 and others. You can find the full list of exemptions in FinCEN’s Small Entity Compliance Guide. 2
  • If your business is not exempt, you need to file a Beneficial Ownership Information report with FinCEN. You can do this online using the BOI E-Filing System.3 You will need to provide the names, dates of birth, addresses, and identification documents of each beneficial owner of your business. Alternatively, you can create a FinCEN ID for each beneficial owner.4 A FinCEN ID is a unique identifier that can be used to protect the personal information of the beneficial owners. Getting a FinCEN ID will likely simplify your reporting process as you can list the FinCEN ID for each beneficial owner on a Beneficial Ownership Information report.
  • If your business was formed after January 1, 2024, you have 90 days from the date of formation or registration to file your first report. If your business was formed before January 1, 2024, you have until January 1, 2025 to file your first report. You also need to file an updated report within 30 days of any change in your beneficial ownership information. Note that you do not have to file an annual report.
  • There are penalties for noncompliance with the CTA. You could face civil fines of up to $500 per day and criminal penalties of up to $10,000 and/or two years in prison for failing to report or providing false or fraudulent information.
  • Be aware of potential scams related to the CTA. FinCEN does not send unsolicited requests for information or ask you to click on any links or scan any QR codes. If you receive any suspicious emails or letters claiming to be from FinCEN, do not respond or open any attachments.

For more information and resources on the CTA, you can visit FinCEN’s website5 or reach out to one of our attorneys to ensure your company is compliant and to discuss your specific needs.

1 The “large operating company” exemption applies to an entity that (i) employs more than 20 full-time employees in the United States, (ii) has an operating presence at a physical office in the United States, and (iii) has filed a federal income tax or information return in the United States for the previous year demonstrating more than $5 million of gross receipts or sales, excluding gross receipts or sales from sources outside the United States. 2 https://www.fincen.gov/boi/small-entity-compliance-guide 3 https://boiefiling.fincen.gov 4 https://fincenid.fincen.gov/landing 5 https://www.fincen.gov/boi

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