A crucial aspect of compliance with the Corporate Transparency Act (“CTA”) is understanding the various due dates and obligations. A “reporting company” must meet CTA reporting deadlines to avoid potential regulatory penalties. To avoid such penalties for non-compliance, a reporting company must plan ahead to ensure there is sufficient time to conduct CTA analysis, gather beneficial ownership information, and update any outdated corporate records.
1. Initial Reporting Deadline:
CTA requires a reporting company to submit Beneficial Ownership Information (“BOI”) to the Financial Crimes Enforcement Network (“FinCEN”). The initial reporting deadline for entities existing before January 1, 2024, is January 1, 2025, one year after the effective date of the implementation of the regulations. For entities formed after January 1, 2024, the BOI report must be filed within 90 days of the entity’s formation date. However, starting in 2025, newly formed entities shall have 30 days from the date of formation to file. It is essential for companies to start the process of gathering, verifying, and updating BOI well in advance to meet this deadline.
2. Ongoing Reporting Obligations:
After the initial reporting is completed, a reporting company must also adhere to ongoing reporting obligations. Any changes in BOI must be reported to FinCEN within 30 days of the date on which there is a change. This includes updating information for existing beneficial owners or adding new beneficial owners. To ensure timely compliance with these ongoing reporting obligations, it is advised that reporting companies implement clear internal processes and systems for monitoring and updating BOI should any changes occur.
3. Penalties for Non-Compliance:
Failure to comply with the deadlines outlined in the CTA can result in severe penalties. Specifically, willfully providing false or fraudulent information or willfully failing to report complete or updated information may result in civil or criminal penalties. To date, given the novelty of the law, there is limited information on the enforcement of CTA. Nevertheless, it is essential for a reporting company to prioritize timely and accurate reporting to avoid these consequences.
4. Importance of Planning Ahead:
Entities should not wait until a deadline approaches to begin the CTA process. Sufficient time must be allocated to conduct CTA analysis and potentially update corporate records to reflect current beneficial ownership. Entities should therefore promptly begin the CTA reporting process. Rushed and incomplete reporting increases the risk of errors, inaccurate information, and non-compliance.
In conclusion, understanding the due dates associated with CTA is crucial to complying with its requirements. By allocating sufficient time and resources to meet the CTA deadlines, entities can mitigate risks and avoid civil and criminal penalties.
McKenna K. Coffeen, Summer Associate, contributed to this blog post.
