The Corporate Transparency Act (“CTA”) went into effect on January 1, 2024. The CTA requires certain companies (including, but not limited to, LLCs, corporations and limited partnerships) to file a Beneficial Ownership Information (“BOI”) report and disclose information about the entity itself and its “Beneficial Owners” to the U.S. Department of the Treasury, Financial Crimes Enforcement Network (“FinCEN”).

Reporting Requirements

The CTA applies to all U.S. entities created by a filing with a secretary of state or similar office and to foreign entities formed under the law of a foreign country that have registered to do business in the U.S., unless an exemption applies. There are 23 categories of companies exempt from the reporting obligations under the CTA, as listed in the Addendum attached hereto. If your company does not qualify for one of the 23 enumerated exemptions, it will be considered a “Reporting Company” and must file a BOI report with FinCEN. The Reporting Company is ultimately responsible for filing the BOI report.

A Reporting Company must disclose its: (1) legal name and any trade names, “doing business as” (d/b/a), or “trading as”; (2) current address of its principal place of business; (3) jurisdiction of formation or registration; and (4) EIN. Additionally, a Reporting Company formed on or after January 1, 2024 must provide reporting information for each “Company Applicant,” defined in the CTA as the individual who directly files the document to create or register the Reporting Company.

For purposes of the CTA, a Beneficial Owner is any individual who directly or indirectly (i) exercises substantial control over the company or (ii) holds at least 25% of the ownership interests in the company. Each Beneficial Owner must disclose his or her: (1) full legal name; (2) date of birth; (3) residential address; and (4) an image of a valid ID with a unique identifying number, such as a U.S. Passport or a state driver’s license.

Deadlines for Reporting

There are strict deadlines for when a BOI Report is required to be filed with FinCEN:

1. If the entity was in existence prior to January 1, 2024, then the initial BOI Report for the entity must be filed with FinCEN on or before December 31, 2024;
2. If the entity is formed during 2024, then the initial BOI Report for the entity must be filed with FinCEN within ninety (90) days of the formation of the entity;
3. If the entity is formed on or after January 1, 2025, then the initial BOI Report for the entity must be filed with FinCEN within thirty (30) days of the formation of the entity.

Additionally, if there is any change in the information reported to FinCEN following a Reporting Company’s initial BOI report, an updated BOI report must be filed within thirty (30) days of the date such change occurs. Therefore, compliance with the CTA is an ongoing obligation.

Penalties for Noncompliance

Failure to comply with the CTA may result in civil penalties of up to $500 for each day that the violation continues. Further, a person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000 for willfully failing to report or willfully filing false information.

Next Steps

HFM is able to assist you to determine if your entity is subject to the CTA and, if so, which individuals may be considered Beneficial Owners. Further, we can assist you with filing the initial BOI report and any subsequent updated reports.

If you would like to discuss the CTA or your potential reporting obligations, we encourage you to immediately contact HFM Attorneys Anna Burnett and/or Mariana Acedo.

Addendum – Exemptions from the CTA

There are 23 categories of companies exempt from the reporting obligations under the CTA. An analysis of each entity and its subsidiaries/affiliates is required in order to determine if an exemption is available. Any entity that qualifies under any of the following 23 exemptions will not be subject to the BOI report filing requirement:

1. Securities reporting issuer
2. Governmental authority
3. Bank
4. Credit Union
5. Depository institution holding company
6. Money services business
7. Broker or dealer in securities
8. Securities exchange or clearing agency
9. Other Exchange Act registered entity
10.  Investment company or investment adviser
11. Venture capital fund adviser
12. Insurance company
13. State-licensed insurance producer
14. Commodity Exchange Act registered entity
15. Accounting firm
16. Public utility
17. Financial market utility
18. Pooled investment vehicle
19. Tax-exempt entity
20. Entity assisting a tax-exempt entity
21. Large operating company
22. Subsidiary of certain exempt entities
23. Inactive entity