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Corporate Transparency Act Effective January 1, 2024

January 2, 2024

What is the CTA?

The CTA creates a federal obligation for many domestic and foreign entities, regardless of when formed (each, a “Reporting Company”) to disclose: (1) entity information; (2) beneficial ownership information (BOI) for the beneficial owners of the entity; and (3) if the entity was formed on or after January 1, 2024, information regarding the person(s) involved in the formation of a Reporting Company (each, a “Company Applicant”) (collectively referred to as a “CTA Report”).

What entities are Reporting Companies?

The CTA identifies two types of Reporting Companies that must file CTA Reports with FinCEN – domestic Reporting Companies and foreign Reporting Companies.

  • A domestic Reporting Company is a corporation, LLC, or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.
  • A foreign Reporting Company is a corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office.

Are any entities exempt from the reporting requirement?

Yes. The CTA provides exemptions for 23 distinct types of Reporting Companies, including those already adhering to government reporting obligations like publicly traded companies, banks, credit unions, securities brokers or dealers, investment companies, insurance companies, large operating companies, state licensed insurance producers, tax-exempt entities, and registered public accounting firms. If a Reporting Company qualifies for an exemption from the CTA filing requirement, it will not be required to submit any CTA Reports.

Who are Beneficial Owners?

A Beneficial Owner is any individual who either:

  • Exercises “substantial control” over the Reporting Company; or
  • Owns or controls at least 25% of the “ownership interests” in the Reporting Company.

Who is a Company Applicant?

A Company Applicant is the individual who:

  • Directly files the document that creates/first registers the Reporting Company (“Direct Filer”);
  • Is primarily responsible for directing or controlling the filing of the relevant document by another, if more than one individual is involved in the filing.

At least one Company Applicant (and at most two) must be reported.

Note that only Reporting Companies created or first registered on or after January 1, 2024 are required to disclose information regarding its Company Applicant(s).

What information does a Reporting Company need to disclose in its CTA Report?

Reporting Companies must report the following information about the entity itself:

  • Full legal name (including trade names and d/b/a names)
  • Current U.S. address
  • State or jurisdiction where the entity was formed; and
  • IRS Taxpayer Identification Number (TIN) (including an Employer Identification Number (EIN)).

Reporting Companies must report the following information for each of its Beneficial Owners and each of its Company Applicants, if applicable:

  • Full legal name;
  • Date of birth;
  • Residential street address (or business address for Company Applicants, if applicable); and
  • Unique identifying number and issuing jurisdiction from, and image of, anon-expired U.S. passport, state driver’s license, identification document issued by a state, local government, or tribe (or if an individual has none of the foregoing, a non-expired foreign passport).

When does a Reporting Company need to file its CTA Report?

The filing date will depend on when the Reporting Company was created or first registered to do business:

  • Existing Reporting Companies (Created/Registered prior to January 1,2024): No later than January 1, 2025.
  • Reporting Companies Created/Registered on or after January 1, 2024 and before January 1, 2025: Within ninety (90) calendar days of creation or first registration.
  • Reporting Companies Created/Registered on or after January 1, 2025: Within thirty (30) calendar days of creation or first registration.

Does a Reporting Company need to update/correct its CTA Report?

Yes. Reporting Companies must file an updated report within 30 calendar days of any change in the reported information regarding the Reporting Company or its Beneficial Owners. Additionally, Reporting Companies must correct inaccurate CTA Reports within 30 calendar days after they discover or should have discovered that the reported information is inaccurate.

How does a Reporting Company file its CTA Report?

A Reporting Company will file a report electronically through a secure filing system created by FinCEN HERE.

Who can access the information contained in the CTA Report?

FinCEN will store CTA Reports in a centralized database and only share this information with certain governmental agencies and other entities/persons in connection with enforcement matters. The CTA Report will not be available to the public and will not be accessible through Freedom of Information Act (FOIA) requests.

It is important to note that the willful failure to report complete or updated information to FinCEN, or the willful provision of or attempt to provide false or fraudulent information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. For any questions regarding the CTA, please contact a Kerr Russell attorney.