Key Takeaways:

• Small business owners should be aware of a significant change made to the 2021 Corporate Transparency Act effective January 1, 2024

• The Corporate Transparency Act now requires small businesses with fewer than 20 employees to report ownership information to the U.S. Department of Treasury

• Non-compliance may result in fines of up to $500 per day or even criminal penalties

Effective January 1, 2024 the Corporate Transparency Act requires small businesses with fewer than 20 employees to report their ownership information to the U.S. Department of Treasury Financial Crimes Enforcement Network (FinCEN) as part of an effort to curb money laundering and illicit financial operations.

Each beneficial owner of the company – defined as a person who exercises substantial control over the company or who owns or controls at least 25 percent of the company’s ownership interests – is obligated to report their ownership to FinCEN.

The Reporting Company

Companies required to report are called “reporting companies.” There are two types including:

• A corporation, limited liability company or other entity created in the U.S. by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe; or
• A foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing.

Exemptions

Exemptions to the Corporate Transparency Act include large businesses with a substantial U.S. presence, over $5 million in gross receipts, and at least 20 full-time employees. Also exempt are businesses that are already federally regulated.

The exemption categories are as follows:

1. Securities reporting issuer;
2. Governmental authority;
3. Bank;
4. Credit Union;
5. Depository institution holding company;
6. Money services business;
7. Broker or dealer in securities;
8. Securities exchange or clearing agency;
9. Other Exchange Act registered entity;
10. Investment company or investment adviser;
11. Venture capital fund adviser;
12. Insurance company;
13. State licensed insurance producer;
14. Commodity Exchange Act registered entity;
15. Accounting firm;
16. Public utility;
17. Financial market utility;
18. Pooled investment vehicle;
19. Tax-exempt entity;
20. Entity assisting a tax-exempt entity;
21. Large operating company;
22. Subsidiary of certain exempt entities;
23. Inactive entity.

Rules about Timing

The time frame for reporting a reporting company’s beneficial ownership information (BOI) is as follows:

• If the company was created or registered prior to January 1, 2024, the company has until January 1, 2025 to report BOI.
• If the company is created or registered in 2024, the company must report BOI within 90 calendar days after receiving actual or public notice of the company’s creation or the registration becomes effective, whichever is earlier.
• If the company is created or registered on or after January 1, 2025, the company must file BOI within 30 calendar days after receiving actual or public notice that its creation or registration is effective.
• Any updates or corrections to beneficial ownership information that the company previously filed with FinCEN must be submitted within 30 days.

If a person willfully fails to report complete or updated BOI to FinCEN or willfully provides (or attempts to provide) false or fraudulent BOI, FinCEN may pursue civil penalties of up to $500 for each day the violation continues or criminal penalties such as a fine of up to $10,000 or two years imprisonment.

Additionally, for companies created on or after January 1, 2024, the company applicant of a reporting company must provide information on his or her participation in the formation process.

The Company Applicant

A company applicant is:

1. The individual who directly files the document that creates or registers the company; and
2. If more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing.

Information to be Disclosed

If a company is a reporting company, the following information needs to be disclosed:

1. Its legal name;
2. Any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names;
3. The current street address of its principal place of business if that address is in the United States (for example, a U.S. reporting company’s headquarters) or, for reporting companies whose principal place of business is outside the United States, the current address from which the company conducts business in the United States (for example, a foreign reporting company’s U.S. headquarters);
4. Its jurisdiction of formation or registration; and
5. Its Taxpayer Identification Number (or, if a foreign reporting company has not been issued a TIN, a tax identification number issued by a foreign jurisdiction and the name of the jurisdiction).

A reporting company will also have to indicate whether it is filing an initial report, or a correction or an update of a prior report.

For each individual who is a beneficial owner, a reporting company will have to provide:

1. The individual’s name;
2. Date of birth;
3. Residential address; and
4. An identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of the identification document.

Filing the BOI and reporting company information required by the Corporate Transparency Act occurs through a website FinCEN launched on January 1, 2024 at https://boiefiling.fincen.gov.

If you have questions or need more detailed information about the Corporate Transparency Act and its impact on your business, please contact:

• Laura A. Colca
• William J. Greagan
• Jonathan S. Ziss
• Or another member of our Corporate Law and Transactions or Management and Professional Liability teams.