Business Alert: New Reporting Requirements under the Corporate Transparency Act Take Effect Jan 1, 2024

Will Your Business Be in Compliance?

Fall 2023

Effective January 1, 2024, the Financial Crimes Enforcement Network arm of the U.S. Treasury (FinCEN) will begin implementation of new Beneficial Ownership Information (BOI) reporting rules under the Corporate Transparency Act (CTA). The CTA was enacted on January 1, 2021 as part of the Anti-Money Laundering Act of 2020. These new rules are designed to strengthen reporting under the CTA to assist law enforcement in combatting money laundering, tax fraud, financing of terrorism, and other illicit activity through anonymous shell and front companies.

Businesses that fit the definition of a reporting company under the CTA and who are not subject to an exemption must disclose information about beneficial ownership, who created the entity or registered it to do business in the U.S., and report any change to previously reported information within the specified time period. For reporting companies created or registered on or after January 1, 2024 and before January 1, 2025, its initial BOI report must be filed 90 days after receipt of notice of creation or registration; reporting companies created or registered prior to January 1, 2024 will have until January 1, 2025 to file.

Unless exceptions apply, entities considered to be reporting companies include domestic corporations, limited liability companies (LLC), business trusts, most limited partnerships, or any entities created by the filing of a document with a secretary of state or any similar office. 

Once a reporting obligation is determined, a reporting company must next determine who qualifies as a beneficial owner. A beneficial owner under the CTA is generally defined as an individual who, directly or indirectly, either: (1) exercises substantial control over the reporting company; or (2) owns or controls 25% or more of the ownership interests of the reporting company. Substantial control and ownership interests as defined within the rules must be carefully considered to ensure that the correct individuals are identified within the reporting company. For example, a beneficial owner may include a director or senior officer such as the chief executive officer. Where a business does not have such clear titles, and even when it does, more analysis surrounding the person's influence over important decisions and other factors put forth under the rule is necessary.

Determining if you are considered a reporting company, who qualifies as a beneficial owner, and what other information must be disclosed by the stated deadlines requires a careful legal review as civil and criminal penalties for violations are included under these rules.

This brief summary of the rules under the CTA is for informational purposes only and does not constitute legal advice. To inquire about your potential CTA obligations, we invite you to contact us today at 845-561-0550, extension 325.

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