Navigating the FINCEN Corporate Transparency Act: A Guide for Businesses

April 5, 2024

*Please note that the following includes important and time sensitive information regarding the deadlines to file Beneficial Ownership Information Reports as required under recently enacted law.

By Brian Triplitt Selogie

In today’s rapidly evolving regulatory landscape, businesses must stay aware of legislative changes and developments in order to maintain compliance and mitigate risk. One such recent development is the Financial Crimes Enforcement Network (“FINCEN”) Corporate Transparency Act (“CTA”). Signed into law as part of the National Defense Authorization Act for Fiscal Year 2021, this landmark legislation introduces significant implications for corporate transparency and anti-money laundering efforts in the United States.

Understanding the Corporate Transparency Act 

The CTA represents a shift in how the United States government addresses financial transparency, particularly concerning beneficial ownership information. Under this legislation, corporations, limited liability companies, and other similar entities are now required to disclose certain beneficial ownership information to FINCEN, the federal agency responsible for combating financial crimes.  Certain entities, such as publicly traded companies and certain types of financial institutions already subject to strict reporting requirements, may be exempt from certain provisions of the CTA. Additionally, the legislation includes provisions for verifying exemptions and exceptions, ensuring accuracy and reliability in reporting.

Essential Compliance Requirements

In general, the most significant requirement imposed by the CTA on most entities is the filing of a Beneficial Ownership Information Report (“BOI Report”). It is important to note that reporting entities created or registered to do business before January 1, 2024, will have until January 1, 2025 to file their initial BOI Report.

A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report. This 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.

Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI Reports with FINCEN.

What the BOI Report Includes

Identification of Beneficial Owners: 

Covered entities must report to FINCEN in the BOI Report the identity of individuals who directly or indirectly own 25% or more of the entity’s ownership interests, as well as those who exercise “substantial control” over the entity.  According to FINCEN, there are various criteria for determining whether an individual exercises substantial control over the entity.

Identification of Company Applicants:

In addition to beneficial owners, the BOI Report requires an entity to identify the “Company Applicants” who filed or prepared initial entity formation documents on its behalf.  In general, this is either the individual who directly files the document that creates or registers the entity; and/or the individual who is primarily responsible for directing or controlling the filing. Of note, only reporting companies created or registered on or after January 1, 2024, will need to report their Company Applicants.

Entity Information: 

In addition to Beneficial Owners and Company Applicants, entities are required in the BOI Report to provide general entity information, including: the entity’s legal name; any trade names or “dba” names; the current street address of the entity’s principal place of business; the jurisdiction of formation or registration; and taxpayer ID number. 

Key Takeaways for the CTA

  • Your initial BOI Report must be submitted to FINCEN no later than January 1, 2025 (or earlier for entities formed after January 1, 2024) and must list all of your Beneficial Owners and Company Applicants, if applicable. 
  • In order to identify your Beneficial Owners, you must: (i) review your entity’s ownership information to determine any individual who may, directly or indirectly, own a 25% or more ownership interest in the Company; and (ii) identify all individuals who exercise “substantial control” over your company in accordance with FINCEN guidance. 
  • You are required to ensure that your FINCEN BOI Report is current and updated to reflect any changes in the beneficial ownership of the entity. After your initial BOI Report is submitted, all changes to the information must be filed within 30 days of their occurrence. 

For further information regarding the FINCEN CTA requirements visit https://www.fincen.gov/boi-faqs#D_2 or contact a legal professional such as the attorneys of Baker, Burton & Lundy. 

Please note: This document does not constitute legal advice. Please consult an attorney for legal advice on what to do in a particular situation.

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