The Corporate Transparency Act (“CTA”), which affects many small and medium-sized businesses across the United States, went into effect on January 1, 2024. For entities subject to the CTA, reports including information about the entity and its “beneficial owners” (the people who own or control the entity), must be filed with the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). The question of whether an entity must report and who its “beneficial owners” are may require legal analysis and advice.
EVERY business entity created by or registered through the filing of a document with a U.S. state or tribal jurisdiction (including corporations, LLCs, LLPs, etc.) is considered a “reporting company” under the CTA and must file required reports UNLESS it is exempt. Non-exempt reporting companies must file the following reports with FinCEN within the required timeframes:
- Initial Beneficial Ownership (BOI) Report:
- For entities formed before January 1, 2024: before January 1, 2025
- For entities formed in 2024: within 90 calendar days of formation
- Updated Reports: Due within 30 days after the date of any change to any information previously reported to FinCEN (including change of address or personal information)
- Corrected Reports: Due within 30 calendar days after the date when the reporting company becomes aware or has reason to know of any inaccuracy in the information previously reported to FinCEN
Initial BOI reports submitted in accordance with the CTA must contain (1) information on the reporting company itself, (2) personal information about each of the beneficial owners of the reporting company, and (3) if applicable, personal information about the “company applicant” of the company. A beneficial owner is any individual who, directly or indirectly, owns or controls at least 25% of the ownership interests of, or exercises “substantial control” over the reporting company (regardless of any actual ownership of the legal entity). The factors used to determine who is a beneficial owner are complex and the determination may require legal analysis. The company applicant includes: (a) the individual who directly files the document that creates, or first registers, the reporting company; and (b) the individual who is primarily responsible for directing or controlling the filing (up to a maximum of two people).
Subject to the terms of a specific engagement, Schwabe can offer a variety of assistance related to the CTA. We will continue to work with clients to form new business entities, including the filing of the appropriate documents with the Secretary of State. We are happy to help you analyze whether an entity may be exempt from reporting, who the beneficial owners are, and provide other advice related to the CTA. We are also currently prepared to assist with the preparation and filing of initial reports to FinCEN. Schwabe has developed an internal working group which has been constantly monitoring and evaluating changes and new guidance related to the CTA, which can help keep clients up to date with the law’s requirements.
Please note, however, that apart from limited engagements related to the filing of initial reports, Schwabe will NOT collect any of the data which may need to be reported, file reports on behalf of clients (including all updated and corrected reports), store or be a repository for any beneficial ownership information, or track deadlines related to CTA reporting. It will remain your responsibility to file reports to FinCEN and otherwise comply with the CTA.
The BOI reporting page, additional resources and helpful guides related to the CTA can be found on FinCEN’s website, including BOI Frequently Asked Questions and Small Business Compliance Guide.
