The Corporate Transparency Act (31 U.S.C. § 5336 (the “CTA”)) and the associated regulations (31 C.F.R. § 1010.380) took effect on January 1, 2024. The CTA requires certain entities that are classified as reporting companies under the CTA to report their beneficial ownership information and other information to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”).
Reporting companies under the CTA are entities that (a) have been formed by the filing of a document with a secretary of state or any similar office under the law of a State or tribal jurisdiction or (b) entities that have been formed under the law of a foreign country and are registered to do business in any State or tribal jurisdiction by the filing of a document with a secretary of state or any similar office under the law of a State or tribal jurisdiction. Certain entities are exempt from such reporting obligations.
In addition, New York recently adopted the New York LLC Transparency Act which imposes similar disclosure requirements for limited liability companies formed or authorized to do business in New York State. This law will take effect on January 1, 2026, and incorporates many provisions of the CTA.
Reporting Companies Formed After January 1, 2024
Reporting companies that are formed (or, in the case of foreign reporting companies, registered) after January 1, 2024 that are not otherwise exempt have a total of 90 calendar days (in the case of entities formed in 2024) and a total of 30 calendar days (in the case of entities formed in 2025 and thereafter) from the date of formation or registration to file an initial Beneficial Ownership Information report (“BOIR”) with FinCEN on the FinCEN Beneficial Ownership Information portal (www.fincen.gov/boi) (the “FinCEN Portal”).
Reporting Companies Formed Prior to January 1, 2024
Reporting companies that were formed prior to January 1, 2024 that are not otherwise exempt have until January 1, 2025 to file an initial report with FinCEN.
Reporting companies must submit a BOIR form via the FinCEN Portal, which generally includes four parts: (a) filing information, (b) reporting company information, (c) company applicant information, and (d) beneficial owners’ information.
The specific information required depends on when the company was created or registered:
A “beneficial owner” is defined as any natural person who, directly or indirectly, either exercises “substantial control” over the reporting company or owns or controls 25% or more of the company’s ownership interests. A person with substantial control includes anyone who:
Given this broad definition, it is important to evaluate who might exercise such influence over the reporting company regardless of their official title or ownership percentage.
For each individual who is a beneficial owner, a reporting company will have to provide the individual’s name, date of birth, residential address, an identifying number from an acceptable identification document such as a passport or U.S. driver’s license, name of the issuing state or jurisdiction of identification document, and a copy of the identification document used to obtain the identifying number.
The CTA expressly excludes from the definition of reporting company under the statute 23 categories of larger entities, more highly regulated entities, and other types of entities that may be subject to different ownership reporting requirements (31 U.S.C. § 5336(a)(11)(B)). The 23 exemptions are the following:
If there is any change to required information previously submitted to FinCEN concerning a reporting company or its beneficial owners, the reporting company is required to file an updated report with FinCEN within 30 calendar days after the date on which such change occurs.
If a reporting company meets the criteria for any exemption from reporting, subsequent to the filing of an initial BOIR (or any subsequently filed updated report), this change will be considered to be a change in the information previously submitted to FinCEN. Accordingly, the entity must file an updated report.
If a reporting company mistakenly files an inaccurate BOIR, the reporting company may file a corrected report within 30 calendar days after the date on which the reporting company becomes aware or has reason to know of the inaccuracy. The reporting company will not be subject to penalties if such corrected report is filed within 90 days from the date the initial BOIR was submitted.
Given the time frames for filing a BOIR set forth above, existing entities should take immediate steps to determine if the entity qualifies as a reporting company or falls under any exemptions for reporting. To the extent the entity is required to file, the entity should collect and verify all required information of beneficial owners and ensure it is accurate and up-to-date. Also, stakeholders should be informed of the current and ongoing requirements to ensure compliance with the CTA. As noted above, reporting companies formed in 2024 have 90 calendar days from date of formation to file an initial BOIR and reporting companies formed prior to January 1, 2024, must file an initial BOIR by January 1, 2025. Reporting companies formed in 2025 and thereafter will have 30 calendar days from date of formation to file an initial BOIR.
Additional Assistance
For further assistance, please contact a member of our Corporate and Business Law Practice Team or the Phillips Lytle attorney with whom you have a relationship.
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