Corporate Transparency Act
Resource Page
Breaking News - CTA Enforcement Suspended by Department of Treasury
The U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) announced it will not impose fines or penalties for failing to file or update beneficial ownership information (“BOI”) reports under the Corporate Transparency Act (CTA) while it revises regulations. The Treasury also stated that once the new regulations are established, there will still be no penalties or fines for U.S. citizens, domestic reporting companies, or beneficial owners of these companies.
See the Department of Treasury’s Press Release
What is the CTA?
The Corporate Transparency Act (known as the CTA) is a new federal law that went into effect on January 1, 2024. This new law requires most legal entitles to file a Beneficial Ownership Information Report (BOIR) with the Financial Crimes Enforcement Network (FinCEN). Most entities, even small business owners, owners of investment LLCs, nonprofits, and certain family partnerships, will need to file this report before the end of 2024.
It is estimated that more than 32 million small businesses will need to file a BOIR in 2024.
The CTA may require that you file a BOIR on behalf of a company if you:
are a business owner;
have a beneficial ownership in an entity of 25% or more;
have substantial control over an entity; or
are associated with trusts that own or manage other businesses entities
“Substantial control” over an entity is shown by:
An individual being a senior officer in the entity;
An individual having the ability to appoint senior officers in the entity; or
An individual having control over “important decision-making” which includes decisions regarding (i) the nature of the business of the entity, (ii) the finances of the entity, or (iii) the entity’s structure.
Both “beneficial ownership” and “substantial control” include direct and indirect ownership or control.
For many companies, filing the BOIR could be a relatively routine matter similar to filing an annual statement of information. However, the filing requirements can be a bit confusing for companies that have multiple owners, owners with spouses having a community property interest, or individuals who may need to report under the substantial control requirement. The consequences for doing so incorrectly are significant. And, in some cases, the analysis of who is required to file can be very complex. Therefore, it is recommended that all companies consult with qualified legal counsel to discuss their filing requirements.
Penalties
The penalties for failing to report or misreporting can be severe. Anyone willfully violating the reporting requirements could be liable for penalties of up to $500 for each day of continuing violation and criminal penalties include up to two years imprisonment and up to a $10,000 fine.
Recent Legal Challenges
The CTA has been subject to challenges that it is unconstitutional and federal courts have enjoined enforcement of the CTA. Most recently, however, the Department of Treasury has suspended enforcement of the CTA, rendering these challenges moot for now.
Scam Alert
FinCEN has been notified of recent fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the CTA.
The fraudulent correspondence may be titled “Important Compliance Notice” and asks the recipient to click on a URL or to scan a QR code. Those emails or letters are fraudulent. FinCEN does not send unsolicited requests.
Do not respond to these fraudulent messages, click on any links, or scan any QR codes within them.
Have More Questions?
If you have questions about if or how the CTA applies to your company, you can use the link below to reach out to our team and book a paid 30-minute consultation. During this consultation, we can discuss questions specific to your company and the individual information that may be required.
If you are an existing client, you can log into your secure client portal to elect whether to have us assist you with filing your BOIR.
Disclaimer: The information provided on this resource page is for educational purposes only, and is not intended to constitute legal advice. Specifically, this resource page, and all materials and content on this page is intended to provide a general overview of the Corporate Transparency Act. Certain aspects of the CTA are extremely complicated, and this resource page and the information contained in this page are not a complete description or analysis about the way in which the CTA applies to any particular organization or person. The legal analysis under the CTA, as with any legal issue, is highly fact-specific.
If you have specific legal questions, you are encouraged to engage a qualified attorney. You should not act or refrain from acting on the basis of information in this resource page without first seeking legal advice from qualified legal counsel.