The Corporate Transparency Act (the “CTA”) requires several entities to provide the Financial Crimes Enforcement Network (“FinCEN”) with reports regarding their beneficial ownership information (“BOI Reports”).  The purpose of the CTA is to combat financial crimes, such as money laundering and corruption, by increasing transparency in the ownership of business entities. Enacted as part of the National Defense Authorization Act for Fiscal Year 2021, the CTA requirement for certain domestic and foreign entities to file these BOI Reports took effect January 1, 2024.

Reporting Requirements and Procedures

The CTA governs corporations, limited liability companies, and any other entities created by the filing of a document with the Secretary of State or any similar state filing or Indian tribe office.  Entities subject to the CTA must provide FinCEN with BOI reports listing information about their beneficial owners, which include those who directly or indirectly exercise substantial control over the entity or own a significant percentage of the entity.  New entities must also provide information about the company applicants, who either directly filed the documents creating the entity or else directed the filings to occur.  The deadlines for filing the BOI Reports are based on when the entity was created or registered, but it is an ongoing obligation for existing entities to update their information if changes occur.  BOI Reports are filed in a secure, non-public database maintained by FinCEN, accessible only to authorized government authorities and, under specific circumstances, to financial institutions for compliance purposes. Compliance is mandatory, and failure to report accurate beneficial ownership information can result in civil penalties of up to $500 per day and criminal penalties including fines up to $10,000 and imprisonment for up to two years.

Exceptions to the Rule

The CTA lists 23 exempt entities, such as publicly traded companies, government entities, banks, credit unions, and certain kinds of trusts, which are not required to file BOI Reports with FinCEN. FinCEN has provided a checklist to help entities determine whether they are considered exempt under the CTA:  Small Entity Compliance Guide | FinCEN.gov

At Dougherty Molenda, we help our clients determine whether they are governed by the CTA and if they need to file BOI Reports with FinCEN.  Please speak to any one of our business attorneys to determine whether you are subject to the CTA and how we can assist you with compliance.