Information Regarding New Corporate Transparency Act (CTA)

This bulletin was written by GFC’s legal counsel, Gravel & Shea. Questions regarding CTA requirements should be directed to your business or organization’s legal counsel, as the CTA is a legal matter and not a tax filing matter. 

Corporate Transparency Act 

On January 1, 2024, the Corporate Transparency Act (the “CTA”) took effect, imposing reporting and disclosure requirements on new and existing business entities. 

The CTA requires legal entities operating in the United States to file beneficial ownership information (“BOI”) reports with the Financial Crimes Enforcement Network (“FinCEN”). Exemptions to the reporting requirement exist, but are narrowly tailored to heavily regulated industries and large operating companies. Most small businesses will need to file BOI reports. 

Enacted in 2021, the CTA marks a material change in US federal regulations governing the identification and disclosure of beneficial ownership of reporting companies. The stated objective is to enhance transparency and assist law enforcement agencies in combating financial crimes such as money laundering, tax fraud, and other illicit activities. 

The reporting and disclosure obligations fall on “Reporting Companies” that include most entities formed through a filing with a state secretary of state’s office. Reporting Companies include most corporations, limited liability companies and limited partnerships. 

Each Reporting Company is obliged to submit specifically defined information in its BOI reports about: (a) the Reporting Company itself; (b) its “Beneficial Owners”; and (c) the persons involved in forming the Reporting Company (“Company Applicants”). Beneficial owners include all persons that either own or control at least twenty-five (25%) of the ownership interests in the Reporting Company, or exercise substantial control over the Reporting Company. All Beneficial Owners and Company Applicants will need to report their full legal name, address, and upload a copy of a qualifying identification document (driver’s license, passport, etc.) on the BOI report. 

Reporting Companies must file their initial BOI report with FinCEN within thirty (30) days of formation (for domestic Reporting Companies) or registration (for foreign Reporting Companies). FinCEN has increased the filing deadline to ninety (90) days for entities formed or registered in 2024. Reporting Companies, including those formed or registered in 2024, must report any changes to information previously disclosed in a BOI report to FinCEN within thirty (30) days of the change. Non-exempt business entities in existence before January 1, 2024, must file their initial BOI report with FinCEN before January 1, 2025. FinCEN has created an online portal known as the “Beneficial Owner Secure System” (“BOSS”) for Reporting Companies to submit BOI reports. BOSS is now live and accepting BOI reports. 

Reporting Companies that provide false or fraudulent information on BOI reports or willfully fail to comply with the CTA reporting requirements may face civil or criminal penalties of five hundred dollars ($500) per day, a fine of up to ten thousand dollars ($10,000) and/or up to two (2) years of imprisonment. 

To avoid liability and penalties, it is crucial for all entities operating in the United States to understand and comply with the CTA reporting obligations. FinCEN continues to issue and update CTA guidance, which can be found at https://fincen.gov/boi.