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The Corporate Transparency Act – New Reporting Requirements and Potential Penalties Affecting Businesses

Starting January 1, 2024, new reporting requirements will take effect under the Corporate Transparency Act (“CTA”) and certain businesses will be required to file a Beneficial Ownership Information (“BOI”) Report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) identifying persons or entities that own, control, and formed the business. It is important for every business owner to know and understand these new reporting requirements under the CTA, since non-compliance may result in severe penalties.

What is the Corporate Transparency Act? The CTA is a federal anti-money laundering law with the purpose of seeking out bad actors who seek to conceal their ownership of business entities to facilitate illegal acts such as money laundering and tax fraud.

Who has to file a BOI Report? All entities, including domestic corporations, limited liability companies, limited partnership, and entities formed in foreign countries registered to do business in the U.S. are required to file a BOI Report unless the entity qualifies for an exemption.

Who is exempt from filing a BOI Report? While there are 23 exemptions, most exempt categories apply to entities that are already subject to substantial federal or state regulation.  There is also an exemption for large operating companies.

What information is required on the BOI Report? A significant amount of information about the business, and its owners who own or control at least 25% of the ownership interests of the subject business, is required.

When is the BOI Report due?  For entities created before January 1, 2024, the initial BOI Report must be filed by January 1, 2025. For entities created on or after January 1, 2024, the initial BOI Report must be filed within 30 calendar days of the date on which it receives notice that its creation has become effective. BOI Reports must be updated when there is a change in the information reported about the company or its beneficial owners.

What should businesses do to prepare?  It is recommended that all businesses seek the advice of legal counsel to determine if their business is a reporting entity under the CTA. The business can then work with its legal counsel to determine what information needs to be reported and when.

VRS has extensive experience representing businesses, which includes providing advice on corporate compliance, and is available to answer any questions regarding the CTA.