What Your Business Needs to Know as the CTA becomes effective January 1, 2024.

At Burch, Porter & Johnson, we wanted to keep you informed about the Corporate Transparency Act (CTA) and the anticipated impact on existing and new businesses beginning January 1, 2024.

Enacted in 2021, the CTA is a federal law that is intended to prevent the use of an anonymously owned company for money laundering or other illegal purposes. The Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department, will enforce compliance with the CTA.

Starting January 1, 2024, every company deemed a reporting company under the CTA (“Reporting Company”) must file a Beneficial Ownership Information (BOI) report that includes certain information about itself and each of its “beneficial owners.” The BOI report must be filed via the FinCEN online portal, which will open for filing on January 1, 2024 at https://www.fincen.gov/boi.

We have provided below a brief overview of the BOI reporting requirements. Further information from FinCEN is available at https://www.fincen.gov/boi-faqs.

What companies must file a BOI report?
Every U.S. company and foreign company doing business in the U.S. that does not qualify for an exemption under the CTA is a Reporting Company and must file a BOI report.Companies qualifying for one of the 23 exemptions under the CTA (“Exempt Companies”) include companies in certain highly regulated industries (such as financial institutions and insurance companies), tax exempt entities, “large” companies, and wholly owned subsidiaries of an Exempt Company.To qualify for the large company exemption, a company must (1) employ 21 or more full-time employees in the U.S., (2) have reported more than $5 million of gross receipts or sales on its previous year’s federal tax return, and (3) have an operating presence at a physical office in the U.S.Who is a beneficial owner?
For each Reporting Company, a beneficial owner is any individual who, directly or indirectly, either exercises “substantial control” over the company or owns or controls at least 25% of the ownership interests of the company.

An individual exercises “substantial control” over a Reporting Company through any of the following:

  • Serving as a “senior officer” (including as CEO, president, CFO, COO or general counsel) of the Reporting Company.
  • Having authority over the appointment or removal of any senior officer or a majority of the board of directors (or similar body) of the Reporting Company.
  • Directing, determining or having the ability to exercise substantial influence over important decisions made by the Reporting Company, including the company’s business, finances or structure.
What information must a Reporting Company provide in its BOI report?
A Reporting Company must report its legal name, any trade name or d/b/a, the address of its principal place of business, its state of formation or organization, and its Taxpayer Identification Number (TIN).For each beneficial owner, a Reporting Company must report the individual’s full legal name, date of birth, residential address and an identifying number from a U.S. driver’s license or passport, and must provide a copy of such driver’s license or passport.What is the due date for filing a BOI report?

Reporting Companies in existence by December 31, 2023 will have until January 1, 2025 to file their initial BOI report. A new company formed in 2024 will have 90 days from formation to file its initial BOI report. Starting in 2025, a newly formed company will only have 30 days from formation to file its initial BOI report.

After the initial BOI report is filed, a Reporting Company must report any changes to its company or beneficial owner information within 30 days.

What are the penalties for non-compliance with the BOI reporting requirements?

All senior officers and other individuals who willfully violate the BOI reporting requirements may be subject to civil penalties of up to $500 per day of violation and criminal penalties of up to two years imprisonment and a fine of up to $10,000.

The above information is a broad overview of the BOI reporting requirements and does not serve as legal advice concerning CTA compliance.

If you have questions or concerns regarding the CTA and its application to your business, please contact the Corporate and Business Law practice group at BPJ as we would welcome the opportunity to assist you.