PUBLIC SERVICE ANNOUNCEMENT:
Corporate Transparency
Act (CTA)
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As of January 1, 2024, the federal Corporate Transparency Act (the “CTA”) mandates that business entities subject to the CTA file a report called a Beneficial Ownership Information (“BOI Report”).
The stated intention of the CTA is to help prevent and combat money laundering, terrorist financing, corruption, and tax fraud by better understanding who owns or controls companies operating in the US.
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YES! ABSOLUTELY!
Failure to comply could mean a civil penalty for each day that the violation continues, or criminal penalties, including imprisonment for up to two years and/or a fine of up to $10,000.
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UPDATE - On December 26, 2024, the full court of the US Court of Appeals for the Fifth Circuit reversed the three-judge panel of the same Court, reinstating the stay ordered by the US District Court of the Eastern District of Texas, halting the enforcement of the BOI reporting obligations under the CTA nationwide while the merits of the case can be reviewed. As a result, reporting companies are (for the moment) still relieved of their BOI Report obligations and FinCEN’s new deadlines (discussed below) are no longer enforceable for the moment.
Under the old deadlines:
Business entities that were created or registered prior to January 1, 2024 have until January 13, 2025 to file their initial BOI Report. These companies would have otherwise been required to report by January 1, 2025.
Business entities created or registered on or after September 4, 2024 have until January 13, 2025 to file their initial BOI Report. These companies initially had a filing deadline of between December 3, 2024 and December 23, 2024.
Business entities created or registered on or after December 3, 2024 and on or before December 23, 2024 have an additional 21 days from their original filing deadline to file their initial BOI Report.
Business entities eligible for disaster relief may have deadlines that extend beyond January 13, 2025. You should check with us or with FinCEN as to the applicable deadline.
Business entities created or registered on or after January 1, 2025 must file its BOI Report within 30 days of receiving confirmation of creation or registration.
Filing the BOI keeps the business entity in compliance with the CTA.
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A beneficial owner of a reporting company is an individual who directly or indirectly (1) exercises “substantial control” over the reporting company or (2) owns or controls at least twenty-five percent (25%) of the “ownership interests” of the reporting company. “Ownership interests” means the agreement by which ownership rights are created in the reporting company, such as stock certificates, LLC membership certificates, Operating Agreements, and other similar types of evidence of ownership. “Substantial control” means the ability to direct, determine, or exercise substantial influence over important decisions affecting the reporting company.
This includes senior officers in the reporting company or individuals who have authority over the appointment or removal of senior officers or a majority of the board.
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A business entity that is subject to the CTA is called a “reporting company”.
A domestic reporting company is a corporation, limited liability company, limited liability partnership, or other entity created by the filing of organizational documents with a secretary of state or similar office under the laws of a state or Tribal jurisdiction within the United States.
A foreign reporting company is a corporation, limited liability company, limited liability partnership, or other entity that is formed in a foreign country and is registered to do business in the United States or in any Tribal jurisdiction by submitting a document with the secretary of state or any similar office under the law of a US state or Native American tribe.
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No. The CTA only requires a correct, up-to-date, BOI Report.
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If you have questions about what qualifies as “substantial control” and/or “ownership interests”, please see RIN 1506-AB49 of the final FinCEN rules or the FinCEN website FAQs.
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