Corporate Transparency Act Beneficial Ownership Reporting

Starting January 1, 2024, a significant number of businesses will be required to comply with the Corporate Transparency Act (“CTA” or “the Act”). The Financial Crimes Enforcement Network (“FinCEN”) estimates that in the first year, approximately 32.6 million businesses will need to comply with the Act and report information related to the business owners, officers, and controlling persons.

Background 

Regime
Enacted as part of the 2021 National Defense Authorization Act and amending the Bank Secrecy Act, CTA (31 U.S.C. 5336), the CTA is intended to close a perceived information gap related to money laundering and other illicit acts. Specifically, CTA establishes “a database of beneficial ownership information (“BOI”) that will be highly useful in combatting illicit finance and the abuse of shell and front companies by criminals, corrupt officials, and other bad actors” and aids efforts “to protect U.S. national security and safeguard the U.S. financial system from such illicit use.” Although passed in 2020, reporting under CTA was initially delayed. A “Final Rule” was issued in September 2022, making compliance with the Act mandatory for reporting companies as of January 1, 2024.

The definition of a “reporting company” under the Act is complex and may include many small businesses, middle-market businesses, and sole practitioners. There are several categories of exemptions, and most exemptions are for entities that are already subject to substantial federal or state regulation.

Timing
In general, reporting companies created before or registered to do business as of December 31, 2023, have until January 1, 2025, to file an initial BOI report with FinCEN. Reporting companies created or registered to do business on or after January 1, 2024, have ninety (90) days from the date of their registration to file an initial BOI report. Reporting companies created or registered on or after January 1, 2025, have thirty (30) days from the date of their registration to file an initial BOI report. After filing an initial BOI report, reporting companies have thirty (30) days to file updated reports detailing statutorily required changes about the reporting company and/or its beneficial owners.

Penalties
Failure to comply with CTA or missing filing deadlines can result in criminal (fines and/or imprisonment) or civil (monetary) penalties. There is a $500 per day penalty, up to $10,000, and imprisonment of up to two years for failure to timely file initial or updated reports. Additionally, any person who, without authorization, knowingly discloses or uses BOI is liable for $500 per day, up to $250,000, and up to five years of imprisonment.

GTF Recommendation:

It is important for anyone who created or registered a reporting company both on or before December 31, 2023 and on or after January 1, 2024, to seek advice from legal counsel to ascertain both their reporting requirements and to complete the reporting promptly.

GTF works with several attorneys throughout the country who can assist you with CTA. We are glad to provide a list of attorneys for you to choose from.

 Please contact James W. Dawson at (305) 510-0050 if you have any questions. 

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