Corporate Transparency Act goes into effect January 1, 2024
Effective as of January 1, 2024, the Corporate Transparency Act, commonly known as the “Rule,” dictates that entities established through state filing procedures, including limited liability companies, corporations, statutory trusts, and similar entities collectively referred to as “Reporting Companies,” must directly submit beneficial ownership information to the Financial Crimes Enforcement Network (“FinCEN”) of the Department of the Treasury. Failure to adhere to the Rule’s reporting requirements could result in civil and criminal penalties.
On November 30, 2023, FinCEN adjusted the Rule’s filing deadline for Reporting Companies created or registered between January 1, 2024, and January 1, 2025, extending the timeframe from 30 to 90 calendar days.
Reporting Companies in existence before January 1, 2024, have until January 1, 2025, to fulfill the reporting obligations, while those established on or after January 1, 2025, must file within 30 days of their formation.
Reports submitted to FinCEN – Beneficial Ownership Information Reports “BOI Reports” - must identify the Reporting Company and disclose specific personal information about the Beneficial Owners and Applicants.
Two categories of Beneficial Owners are distinguished: those owning or controlling at least 25 percent of ownership interests and those exercising “substantial control” over the Reporting Company. Notably, applicants encompass the individual filing the formation document and the individual primarily responsible for directing or controlling such filing.
The Rule does provide a large number exemptions to the Reporting Company definition. However, these exemptions do not apply to most types of businesses – in general, they are limited to financial institutions, broker dealers and large public companies. They are generally exempted because these types of businesses are already subject to extensive regulations and requirements with respect to filing of similar types of information.
Entities falling within an exempted category are exempt from filing a BOI Report with FinCEN. Furthermore, the Rule introduces the concept of “FinCEN Identifiers.” Individuals frequently appearing in BOI Reports can request a unique number from FinCEN, providing an alternative to repeatedly transmitting personal information with each BOI Report filing. Entities also have the option to obtain FinCEN Identifiers.
