Time is running out. We are now in the 4th quarter of 2024 and despite legal challenges and proposed actions in the legislature, the year-end Corporate Transparency Act (“CTA”) reporting deadline remains incumbent upon Reporting Companies (that are not otherwise exempt) created prior to January 1, 2024. If you have not already discussed the application of the CTA to your business, please contact your Hahn Loeser attorney promptly. To reiterate, CTA reports for subject entities created prior to January 1, 2024 are due by December 31, 2024.
What is the CTA?
By way of reminder, the Corporate Transparency Act took effect on January 1, 2024. It was created with the intent of increasing transparency into the ownership of most privately owned companies operating in the United States, in hopes of preventing illegal activities often conducted through commercial channels. The Department of Treasury’s Financial Crimes Unit (“FinCEN”) was put in charge of creating a reporting framework that requires Reporting Companies to report information about itself and its beneficial owners on what is called a “Beneficial Ownership Report” (“BOI Report”). Failure to comply may result in the imposition of civil monetary and criminal penalties.
What is a Reporting Company?
Any entity, whether a corporation, limited liability company, limited partnership, or any other type of entity that files creation documents with any Secretary of State or equivalent tribal authority, is a Reporting Company. There are, however, twenty-three (23) enumerated exemptions to the CTA whereby a Reporting Company is excused from filing the BOI Report. Application and analysis of the exemptions is not always easy and may require some diligence conducted by your attorney. Given that 2024 is flying by, business owners should already be coordinating with their attorneys on this analysis by now. Most privately owned businesses are expected to be Reporting Companies.
What is a BOI Report?
The BOI Report is the document electronically filed with FinCEN containing identifying information about the Reporting Company, including personal identifying information of those individuals who ultimately own at least twenty-five percent (25%) of the Company’s equity and personal identifying information of those individuals who substantially control its operations. Analysis of what constitutes “substantial control” may require coordination with an attorney, especially where Reporting Companies are owned by other entities or trusts.
Do I Really Need to Do This?
The CTA is currently effective law and is mandatory. Business owners should be talking to their counsel by now to determine whether their business is exempt from the CTA or has a reporting requirement, likely due on December 31, 2024. The CTA also imposes mandatory update requirements and certain states are working on a state-level version of the CTA that may apply to businesses operating in their jurisdiction. The CTA, until further notice, is a new mandatory requirement for businesses to contend with and Hahn Loeser attorneys are available to assist.
