The 2024 Corporate Transparency Act And What It Means For Your Business

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The Corporate Transparency Act (CTA) became effective on January 1, 2024, mandating certain companies to submit beneficial ownership information reports (BOI Reports) to the Financial Crimes Enforcement Network (FinCEN). The CTA, a crucial component of the Anti-Money Laundering Act of 2020, aims to enhance the anti-money laundering framework by fostering transparency in entity structures and ownership.

So, what does this mean for your business? Simply put, reporting standards might have shifted radically depending on the type of commercial entity you own. Please note that a recent federal court order by The United States Fifth Circuit Court of Appeals imposed an injunction on the enforcement of the CTA.  As a result, reporting companies are not currently required to file beneficial ownership information with FinCEN and are NOT subject to liability if they fail to do so while the order remains in force. However, you may continue to voluntarily submit beneficial ownership information reports.

To remain compliant with these standards either voluntarily or in preparation for the order being rescinded, we recommend reading through the following and contacting your business and tax attorneys to inquire more.

  1. Who Must Report? 

Reporting companies (RC), defined as corporations, limited liability companies, or similar entities formed or registered with a secretary of state or equivalent office, must file BOI Reports. Trusts formed without document filing generally fall outside the scope of the CTA.

  1. What Information Is Required? 

Reporting companies must provide: 

  1. Its legal name; 
  2. Any trade names;
  3. The current street address of the principal place of business; 
  4. The jurisdiction of formation or registration, and 
  5. Taxpayer identification number (or equivalent issued by a non-US jurisdiction).

For its Beneficial Owners, the Reporting Company must provide: 

  1. The individual’s name; 
  2. Date of birth; 
  3. Residential address, and 
  4. A photo of acceptable identification such as a passport or US driver’s license.

Beneficial Owners include anyone who, directly or indirectly, either exercises substantial control over the RC or owns or controls at least 25 percent of its ownership interests.

Substantial control refers to control over the Reporting Company’s essential decisions. This includes senior officers or anyone with the authority to appoint or remove officers or directors, among others.

Due to the complex nature of these new reporting requirements, it’s highly recommended that business owners utilize the services of an experienced and capable business law firm when filing. Firms like Villasenor Law Offices will help ensure that your business remains fully compliant and avoids any destructive penalties.

  1. When Must You Report? 

Compliance deadlines vary based on the formation or registration date of the entity.

  • A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial beneficial ownership information report.
  • A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report. This 90-calendar day deadline runs from when the company receives actual notice that its creation or registration is effective or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.
  • Changes: You must file updated and/or corrected reports within 30 days of any change. This includes companies that become exempt after filing BOI.

You can file a BIO here: https://boiefiling.fincen.gov/. There is no fee to file.

  1. Penalties for Non-Compliance: 

Reporting Companies and senior officers who willfully fail to file or update a report are subject to a fine of $500/day for continuing violations, up to $10,000, and/or imprisonment for two years. There is a safe harbor for Reporting Companies that voluntarily correct an inaccurate report “promptly,” ie, within 90 days of filing the report.

Additionally, anyone who knowingly discloses BOI without authorization is subject to a fine of $500/day, up to $250,000, and/or imprisonment for up to five years. There are increased fines (up to $500,000) and imprisonment (up to ten years) if the unauthorized disclosure of BOI involved a pattern of other unlawful activity involving more than $100,000 in 12 months or while violating another US law.

We urge all businesses that believe they qualify as Reporting Companies to file their BOI before the deadline of January 1, 2025 (if created before 2024). To help ensure that your reporting meets all compliance requirements, we highly recommend that you contact Villasenor Law Offices to assist in the preparation of your documentation.

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