The Corporate Transparency Act (CTA), enacted as part of the Anti-Money Laundering Act of 2020, introduced a significant shift in disclosure requirements for certain U.S. and foreign legal entities. The Final Rule took effect January 1, 2024. It aims to increase transparency in corporate ownership and does so through increased reporting requirements.
For the majority of domestic and foreign entities, the time to report newly required beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN) is soon approaching. Below we’ll dive into key aspects of this new regulation and action steps your business may need to take before the end of the year. If you have any questions or need help complying with the regulation, contact our team at the Law Offices of Alex D. Sirulnik, P.A. right away.
Which Entities Must Report BOI with FinCEN?
The majority of domestic and foreign entities are required to report beneficial ownership information with FinCEN, although there are some exemptions. For a list of 23 entity types that are exempt from reporting, refer here to the Federal Register website.
Domestic reporting companies include any corporation, LLC or similar entity that was created by filing with the secretary of state or similar office. Foreign reporting companies are any legal entity formed under the laws of a foreign country that is registered to do business in any state within the United States.
Who is Considered a “Beneficial Owner”?
The term “beneficial owner” is central to the CTA. It includes individuals with substantial control over a reporting company or those owning or controlling at least 25% of its ownership interests.
The definition extends to senior officers, those with appointment or removal authority, and important decision-makers. FinCEN emphasizes direct and indirect substantial control and intends to capture various scenarios in which influence within an entity is exerted.
Exemptions include certain categories such as minors, intermediaries, employees (excluding senior officers), and those with only future interests through inheritance. Creditors of a reporting company also fall outside the scope.
What is the Reporting Process and BOIR Form?
The reporting process involves providing detailed information about reporting companies, beneficial owners, and company applicants. Initial BOI reports are due by January 1, 2025, for entities existing before January 1, 2024. Those formed or registered between January 1, 2024, and December 31, 2024, may benefit from a proposed 90-day extension.
Start Preparing for Change Today. Contact Our Team of Attorneys for Help
The Corporate Transparency Act represents a significant shift toward greater transparency in corporate ownership. Navigating these changes requires a thorough understanding of reporting obligations and exemptions as well as the tools provided by FinCEN.
Contact us at the Law Offices of Alex D. Sirulnik, P.A. to learn more about these and other corporate compliance matters. As the reporting landscape evolves, staying informed and proactive is key to successful compliance. Our attorneys are here to help.
