What You Need to Know about the Corporate Transparency Act Effective January 1, 2024
What Is the Corporate Transparency Act?
Federal Congress enacted the Corporate Transparency Act (the “CTA”) in 2021. This new law did not become effective until January 1, 2024. The purpose of the CTA is to “crack down on anonymous shell companies, which have long been the vehicle of choice for money launderers, terrorists, and criminals.” In summary, the CTA creates a new federal database of nearly all the companies in the United States, and the human beings that own or control those companies.
Can Owners Still Remain Anonymous?
Prior to January 1, 2024, it was easy for someone to form a company through the help of an attorney and not have to publicly disclose the owners of the company. People could also remain anonymous using holding companies and subsidiary companies. This anonymity was important for many people. The CTA changes that. For most companies, you will now have to disclose the owners of the company to the federal government. However, at this time, the general public will not have access to the database.
Do You Qualify for An Exemption?
Most companies will have to submit a report called a Beneficial Owner Information Report (a “BOIR”). There are 23 exceptions, as follows:
- Securities reporting issuer
- Governmental authority
- Bank
- Credit union
- Depository institution holding company
- Securities exchange or clearing agency
- Insurance company
- State-licensed insurance producer
- Commodity Exchange Act registered entity
- Money services business
- Broker or dealer in securities
- Accounting firm
- Public utility
- Financial market utility
- Pooled investment vehicle
- Tax-exempt entity
- Other Exchange Act registered entity
- Investment company or investment adviser
- Venture capital fund adviser
- Entity assisting a tax-exempt entity
- Large operating company
- Subsidiary of certain exempt entities
- Inactive entity
What Do You Have to Report on The BOI Report?
The CTA requires all companies (except the 23 exempt entities listed above) to report 1) anyone who has substantial control over the company AND 2) anyone that owns 25% or more of the company. For these individuals, you have to disclose their name, address, date of birth, driver’s license or passport information, and a copy of their photo identification. For example, if your company has three owners and a CEO with 10% equity, then you would need to include all four individuals on the BOIR.
What Is Your Deadline to File the BOI Report?
For existing companies formed before January 1, 2024, you have until the end of 2024 to file the BOI report. For new companies formed after January 1, 2024, you have a grace period of 90 days from the date of forming the new company. Then, starting January 1, 2025, that grace period shortens to 30 days following the date of forming the new company. If any company information changes, you must file updated information within 30 days of the change.
How Do You Submit the BOI Report?
The report can be submitted online at https://www.fincen.gov/boi. There is no filing fee. Some companies may choose to do this themselves; others may ask their attorney or CPA to handle it for them.
What Happens If You Fail to Company?
The CTA gives the federal government the ability to fine companies $500 per day for non-compliance.
What Are Your Next Steps?
You should first decide whether you are going to try to comply yourself, or if you are going to ask your attorney or CPA to help you. Our law firm is currently offering this service for the following rates:
If we formed your company = $100 per person that needs to be included in the BOIR (price subject to change)
If we did not form your company = $200 per person that needs to be included in the BOIR (price subject to change)
New companies formed after January 1, 2024 = this will be included in the total price
If you are going to comply yourself, you can further educate yourself on the requirements by reading the following instructions prepared by the federal government: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide_FINAL_Sept_508C.pdf