‘Tis the season and past time for a ho-ho-hum approach to Corporate Transparency Act reporting deadline
Time is running out for Corporate Transparency Act (CTA) compliance. The law, which became effective on January 1, 2024, requires certain entities – or “reporting companies” – to disclose information about their beneficial ownership to the Financial Crimes Enforcement Network (FinCEN) by January 1, 2025.
While many companies created or registered to do business in the US after January 1, 2024 have already complied with these requirements, FinCEN estimates that close to 25 to 30 million businesses subject to the CTA’s requirements have not yet filed. In addition, the FinCEN beneficial ownership reporting website has reportedly experienced several unexpected service interruptions in November, and failure to comply may leave companies open to civil or criminal penalties.
For these reasons, businesses are encouraged to determine which individuals will need to report beneficial ownership information well before December 31, 2024 and begin reaching out to those individuals to collect the required information and documents, described below.
Who must comply under the CTA?
As outlined in our prior alert, a reporting company is a domestic or foreign entity formed or registered to do business in any US state, territory, or Indian Tribe that does not qualify for any of the 23 exemptions under the CTA.[1] Entities that qualify for an exemption as of January 1, 2025 do not need to file anything with FinCEN to indicate that they are exempt.
Deadlines to file beneficial ownership information reports (BOI reports)
Timely compliance with the CTA’s reporting requirements, including amendments or corrections, is key to avoid exposure to civil or criminal penalties. The deadline for a reporting company to file its BOI report depends on the reporting company’s formation or registration date, as described below.
- A reporting company formed or registered before January 1, 2024 must file its BOI report by January 1, 2025
- A reporting company formed or registered between January 1, 2024 and December 31, 2024 must file its BOI report by 90 days from its formation or registration date[2]
- A reporting company formed or registered on or after January 1, 2025 must file its BOI report by 30 days from its formation or registration date
There is no fee required to submit a BOI report, which can be filed electronically or by uploading a BOI report form found on FinCEN’s website. Reporting companies may consider consulting with counsel prior to submitting a BOI report.
Who is a beneficial owner (BO)?
A BO is anyone who, directly or indirectly, (1) exercises substantial control over the reporting company or (2) owns at least 25 percent of the ownership interests (eg, the shares of equity, stock or voting rights) of the reporting company. Substantial control refers to the authority to make important decisions of the reporting company.
An individual can exercise substantial control if any of the following is true:
- The individual is a senior officer (president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer who performs a similar function, for the reporting company)
- The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company
- The individual makes important decisions for the reporting company, such as decisions about a reporting company’s business, finances, and structure
- The individual has any other form of substantial control over the reporting company
What information must be submitted?
Each reporting company will need to gather the following information for submission on its BOI report:
- Full legal name
- Any trade name(s) or “doing business as” (DBA) name(s)
- Complete current US address of the reporting company’s principal place of business in the US, or, if the reporting company’s principal place of business is not the US, the primary location in the US where the reporting company conducts business
- State, Tribal, or foreign jurisdiction of formation
- For a foreign reporting company, State or Tribal jurisdiction of first registration
- Internal Revenue Service (IRS) Taxpayer Identification Number (TIN), including an Employer Identification Number (EIN)
- If a foreign reporting company has not been issued a TIN, report a tax identification number issued by a foreign jurisdiction and the name of such jurisdiction
Each BO for each reporting company will need to gather:
- Full legal name
- Date of birth
- Residential address
- Report the individual’s residential street address, except for company applicants who form or register a company in the course of their business, such as paralegals. For such individuals, report the business street address. The address is not required to be in the US.
- Unique identifying number and issuing jurisdiction from, and image of, one of the following nonexpired documents:
- US passport
- State driver’s license
- Identification document issued by a state, local government, or Tribe
- If an individual does not have any of the previous documents, a foreign passport
Reporting companies created or registered on or after January 1, 2024 will need to report the same information required of BOs for their company applicants. A reporting company can have up to two individuals who could qualify as company applicants: (1) the individual who directly files the document that creates or registers the reporting company and, (2) if more than one person is involved in the creation or registration, the individual who is primarily responsible for directing or controlling the creation or registration of the reporting company.
Updates or corrections to BOI reports
Once a reporting company files its initial BOI report, it still has an ongoing obligation to keep the BOI report up to date. Should there be any changes to the information submitted to FinCEN, a reporting company is obligated to update or correct its BOI report within 30 days. Such changes include, but are not limited to:
- Any change to the information reported for or by the reporting company, such as registering a new business name
- A change in BOs, such as the appointment of a new senior officer,[3] as defined under the CTA, including a president or chief executive officer
- A change in ownership or control of 25 percent or more in the reporting company, or
- Any change to a BO’s legal name, home address, or unique identifying number previously provided to FinCEN.
Similarly, if a reporting company learns of any errors in its BOI report, it is required submit a correction within 30 days of when it first becomes aware, or has reason to believe, that the information reported on the previously filed BOI report was inaccurate.
Finally, if an entity previously filed a BOI report but subsequently becomes exempt from filing, the entity is required to file an updated report indicating that it is no longer a reporting company.
Dissolved entities
If a company ceased to exist as a legal entity before January 1, 2024 – meaning that it entirely completed the process of formally and irrevocably dissolving – it is not required to file a BOI report.
However, if a reporting company existed as a legal entity for any period of time on or after January 1, 2024 and did not qualify for an exemption, the reporting company is still required to file a BOI report by the applicable deadline, even if it had wound up its affairs and stopped operating business before January 1, 2024.
Furthermore, if a reporting company was created or registered on or after January 1, 2024 and it subsequently completed the process of formally and irrevocably dissolving, then it is still required to file a BOI report with FinCEN.
For more information
DLA Piper’s CTA working group offers comprehensive materials, including detailed guides, to assist in the filing process of the BOI report. For additional guidance regarding compliance with the CTA, please contact your DLA Piper relationship partner or any of the authors.
[1] Exemptions generally apply to highly regulated businesses, large operating companies, pooled investment vehicles, wholly owned subsidiaries of certain exempt entities, and inactive entities.
[2] A reporting company affected by recent natural disasters declared by the Federal Emergency Management Administration (FEMA) – such as hurricanes – may qualify for a six-month extension, provided the reporting company meets specific criteria set forth by FinCEN.
[3] The term “senior officer” is defined under FinCEN’s final rule as any individual holding the position or exercising the authority of a president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer, regardless of official title, who performs a similar function.
