The Corporate Transparency Act (“CTA”) is a federal law that was enacted in 2021 and became effective January 1, 2024. The CTA was created to reduce money laundering and bad acts by shell companies, by creating a database of beneficial ownership information for law enforcement to utilize when conducting its investigations.

The CTA compels most limited liability companies, corporations, and other small entities, created or registered to do business by filing with a State Secretary of State to file a Beneficial Ownership Information (“BOI”) report to the United States Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). Entities formed on or after January 1, 2024, must file a BOI report within 90 days of their creation. Entities formed prior to January 1, 2024, must file their BOI report before January 1, 2025.

A reporting company is any entity created or registered to do business through a filing with a state Secretary of State office unless exempt under the law. There are a number of exemptions, some defined by revenue and employee thresholds.

The purpose of the law is to identify a Beneficial Owner, whether their interests are held directly or indirectly. Depending on the circumstances, trustees, beneficiaries, or grantors/settlors could each qualify as beneficial owners.

The CTA defines a Beneficial Owner as any person who either 1) beneficially owns 25 percent of the reporting company’s ownership interests; 2) has substantial influence over major decisions of the reporting company; or 3) is a senior officer of the reporting company.

The BOI report for a Beneficial Owner shall include identifying information about the individuals who directly or indirectly own or control a reporting company.
CTA provides that the information collected through BOI reports will be held privately by FinCEN, and only be used for law enforcement purposes. BOI reports will be filed online through a portal maintained by FinCEN.

A person that willingly violates the BOI reporting requirements may be subject to civil penalties of up to $500 a day, and criminal penalties of up to two years of imprisonment and a fine up to $10,000.

If you are or think you may be a Beneficial Owner of a reporting company, you are encouraged to seek legal advice. The information provided here does not, and is not intended to, constitute legal advice; rather, all information presented is for general information only.