Ensuring Compliance with the Corporate Transparency Act

The Corporate Transparency Act (“CTA”) has arrived, ushering in a new era for Reporting Companies. This landmark legislation mandates crucial changes, making swift and accurate compliance a top priority. Entities must be proactive, with compliance deadlines varying based on their formation date.

Deadlines: Entities formed during 2024 have a 90-day window to file their initial Beneficial Ownership Information (BOI) Reports. Meanwhile, entities formed before January 1, 2024, enjoy an extended timeline, with a deadline of January 1, 2025, to submit their initial BOI Reports. This phased approach allows businesses to adapt effectively to the new compliance requirements.

Beneficial Owner: To navigate the CTA successfully, entities must understand the concept of a Beneficial Owner. These are individuals who either exercise “substantial control” over the Reporting Company or own/control at least 25% of its ownership interests. The definition of “substantial control” extends to senior officers, those with authority to appoint/remove senior officers or a majority of the board, and individuals with substantial influence over critical company matters. As this definition can be quite broad, it is best to over-report.

FinCEN ID: Consider obtaining a FinCEN ID Number, a unique identifier issued by FinCEN. While not mandatory, having this number simplifies the reporting process. When submitting BOI Reports to FinCEN, individuals or Company Applicants can use their FinCEN ID Number instead of providing detailed information. FinCEN ID Number can be obtained here.

Reporting: All BOI Reports must be submitted through FinCEN’s website . Ensuring accuracy and timeliness in this process is crucial for compliance. Reporting Companies have a 30-day window to report any changes or inaccuracies in the information provided in BOI Reports. Notably, the current BOI Report form, as of January 4, 2024, doesn’t include ownership percentages. This implies that changes in ownership, if they don’t alter the identified Beneficial Owners, may not necessitate an amendment to the report.

Navigating the complexities of the Corporate Transparency Act requires Reporting Companies to proactively integrate compliance into their corporate fabric. Recognizing the significance of early compliance, entities should establish internal measures and processes for timely and accurate reporting, obtaining FinCEN ID Numbers, and understanding beneficial ownership intricacies. Early adoption and continuous improvement in compliance processes is key to navigating the Corporate Transparency Act successfully.