In the calendar year 2024, roughly 32.6 million companies will be required by the Corporate Transparency Act (“CTA”) to report personal information about their beneficial owners. The report must be made to the Financial Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Department of the Treasury.

The information below provides an overview of the requirements for our business clients that were created or registered prior to January 1, 2024. Unless your business is exempt from reporting requirements (which we consider in more detail below), it will be required to file a Beneficial Ownership Information Report (“BOI Report”) with FinCEN. 

This report is due by January 1, 2025.

Dinsmore’s CTA Task Force is here to help

We have created a task force dedicated to assisting our clients with CTA-related issues which we explain in more detail below. We understand you may have questions or need assistance with such issues including, but not limited to:

• determining exemptions to the CTA, and whether your entity qualifies;
• identifying Beneficial Owners;
• assisting you and answering questions as you prepare BOI Reports; or
• updating your organizational documents to make sure your Beneficial Owners cooperate in the Reporting Company’s compliance with the CTA.

If this is the case, please feel free to reach out to your Dinsmore attorney. We are committed to assisting our clients in an ever-changing legal landscape.  

Who is required to file with FinCEN?

All Reporting Companies not exempt from the requirements of the CTA must file a BOI Report with FinCEN that provides certain information about their Beneficial Owners.

A “Reporting Company” is a corporation, LLC or other entity created in the United States by filing a document with a secretary of state or similar office under the law of a state or Indian tribe. A Reporting Company can also be a foreign company registered to do business in any U.S. state or Indian tribe through a filing with a secretary of state or similar office. 

Most importantly, unless a Reporting Company qualifies for one of 23 exemptions from the reporting requirements of the CTA, it must submit a BOI Report to FinCEN. The availability of an exemption depends on many factors, is unique to each entity and may involve complex legal analysis.

What is a Beneficial Owner?

A “Beneficial Owner” is an individual who:

(1)  owns or controls (directly or indirectly) at least 25 percent of a Reporting Company; or

(2)  has substantial control over a Reporting Company.

Determining a Beneficial Owner through ownership interests requires a two-step process:

(i) identifying and classifying the various equity interests and rights to acquire equity interests in the Reporting Company; and

(ii) calculating whether the holder of those equity interests meets the threshold to be considered a Beneficial Owner. 

The determination of a Beneficial Owner is unique to each company with respect to both governance structure and organizational structure. It can be complex to determine if executives and employees with decision-making authority have substantial control over a Reporting Company. This is especially true when a holding company owns part of the Reporting Company. There are also countless other scenarios affecting this determination. The analysis regarding beneficial owner status is not a clear-cut determination and guidance from legal counsel is advised before preparing and filing a BOI Report.

What must a Reporting Company disclose?

The BOI Report for each Reporting Company must contain:

(i) certain general information about the Reporting Company (such as the company name, address, state of formation and tax identification number); and

(ii) certain personal information about each Beneficial Owner (such as name, address, date of birth and a form of identification).

Although filing a BOI Report is not an annual requirement, a Reporting Company has an obligation to update its BOI Report if it becomes aware of changes that would affect its accuracy. This would include changes such as the makeup of Beneficial Owners or an address change of a Beneficial Owner. Updates to the BOI Report must be submitted to FinCEN within 30 days.

What are the penalties for failing to report on time?

A person who fails to file or update information may be subject to both civil penalties (up to $591 per day) and criminal penalties (fines up to $10,000, imprisonment of up to two years, or both).

How Does a Company Report?

A Reporting Company can file its BOI Report electronically through FinCEN’s website. There is no fee for filing and the Reporting Company will receive a confirmation of receipt once the BOI Report is successfully submitted. A Reporting Company may also use a third-party vendor to assist with filing the BOI Report. If you are interested in using a third-party vendor, Dinsmore has contacts to assist you and we are happy to facilitate an introduction.

Newly created Reporting Companies

Although not the primary purpose of this alert, it is important to be aware that the CTA also applies to newly created Reporting Companies. Reporting Companies created or registered after January 1, 2024, are required to report personal information about their Beneficial Owners and Company Applicants.  If created during calendar year 2024, the initial BOI Report is due 90 days after the Reporting Company has been formed.  Reporting Companies created or registered after January 1, 2025, will only have 30 days to file an initial BOI Report. Dinsmore is prepared to assist with any new entity formation and ensure CTA compliance for the newly formed business.

Dinsmore is here to help

Our CTA Task Force is here to help.  Please feel free to reach out to your Dinsmore attorney to get started.