The Corporate Transparency Act (“CTA”) is a federal law that became effective on January 1, 2024. The CTA requires Covered Entities to make a federal filing.
The purpose of the CTA is to create a national database of businesses in the U.S. and the human beings behind them (both owners and those in control of the entities). The law is part of an increasing effort to combat money-laundering, terrorism, tax evasion, and other financial crimes.
Almost all limited liability companies, corporations (both C and S corporations), limited partnerships (LPs), and other held entities that are created by a state filing, are Covered Entities. There are few exceptions to the reporting requirement. Most entities with fewer than 20 employees and less than $5 million in annual revenue must file a report. Owners and control persons involved in those entities will also have to provide information to the entities that report.
Covered Entities are required to file Beneficial Ownership Information (“BOI”) within 90 days of formation (which is shortened to 30 days, effective January 1, 2025). Covered Entities in existence before January 1, 2024 will have until December 31, 2024 to file their initial reports.
If you have entities, either as part of your operating business, your estate or asset protection planning, your real estate planning, or for any other reason, you may be required to file BOI under the CTA. Depending on the ownership structure of your entities, determining who is a “Beneficial Owner” of the entity pursuant to the CTA is nuanced, and may include individuals that you would not have considered.
Covered Entities may also want to amend their organizational documents (e.g., operating agreements or buy-sell agreements) to require Beneficial Owners to supply the entity with personal information necessary for the entity to make its BOI filing.
There are severe penalties, including possible jail time, for failure to comply with the CTA. Civil penalties of up to $500 per day may be imposed, as well as criminal fines of up to $10,000, and imprisonment of up to two years.
While we would happy to assist you in complying with the CTA moving forward, please be aware that such service is not within the scope of our current or past engagement. Unless and until you expressly engage us to assist you in this endeavor, you will have the sole responsibility for compliance with the CTA, including its BOI reporting requirements and the collection of relevant ownership information. Information regarding the CTA and its BOI reporting requirements can be found at https://www.fincen.gov/boi.