The deadline for compliance with the Corporate Transparency Act (“CTA”) is quickly approaching with millions of organizations throughout the United States required to submit beneficial ownership information to the Financial Crimes Enforcement Network (“FinCEN”) prior to the January 1, 2025 deadline.
If you have questions about your entity’s reportability under the CTA, please seek professional guidance from an attorney or other licensed professional.
Background
Congress enacted the CTA as part of the Anti-Money Laundering Act of 2020 (31 U.S.C.A. § 5336). The CTA mandates the creation of the Beneficial Ownership Secure System database and requires entities to disclose information regarding beneficial ownership. Any entity created by submitting a filing with a Secretary of State (or comparable governing body) prior to January 1, 2024, that fails to qualify for a codified exemption, must file a beneficial ownership information report prior to January 1, 2025 (“Reporting Company”). Penalties for willful failure to comply with the CTA’s reporting requirements are severe and include civil fines of $591 per day, criminal fines of up to $10,000 and up to two years imprisonment.
Additional background on the CTA, including who is impacted, the reporting requirements and general compliance considerations are available in our previous alert.
Upcoming Reporting Deadlines
- Any Reporting Company existing or registered before January 1, 2024, must file an initial beneficial ownership information report by January 1, 2025.
- Any Reporting Company created or registered after January 1, 2024, must file an initial beneficial ownership information report 90 days after its creation or registration. The 90-day reporting window runs from the time the Reporting Company receives actual notice that its creation or registration is effective, or after the Secretary of State first provides public notice of its creation or registration, whichever is earlier.
Compliance Resources
Navigating the CTA’s reporting requirements is challenging. However, FinCEN published resources to assist organizations with maintaining compliance.
- The Small Entity Compliance Guide. The Small Entity Compliance Guide is intended to help small organizations comply with the CTA’s reporting requirements. The guide includes useful summaries, checklists and decision trees to assist organizations throughout the filing process.
- Beneficial Ownership Information – Frequently Asked Questions. FinCEN regularly updates a list of Frequently Asked Questions based on inquiries received from Reporting Companies. Although the Frequently Asked Questions are explanatory in nature, they offer valuable insight into various CTA nuances.
- The Beneficial Ownership Reporting Outreach and Education Toolkit. On September 19, 2024, FinCEN published the Beneficial Ownership Reporting Outreach and Education Toolkit (“Toolkit”). The Toolkit contains templates and sample content structured to help private, public and non-profit organizations share information regarding the CTA’s reporting requirements. Although the Toolkit lacks substantive guidance, it includes useful templates including draft newsletters, website alerts, outreach e-mails, sample social media posts and information on contacting FinCEN directly.
Practical Takeaways and Next Steps
Reporting Companies should consider seeking professional guidance from an attorney to ensure compliance with the CTA. Given the complexities of identifying all the information that must be reported and the substantial penalties for failure to comply, entities subject to the rule should begin collecting the information required to be reported as soon as possible.
If you have any questions or would like additional information about this topic, please contact:
- John Bowen at jbowen@hallrender.com or (317) 429-3629;
- Eric Speer at espeer@hallrender.com or (317) 741-0661; or
- Your primary Hall Render contact.
Special thanks to Ben Murphy, Summer Associate, for his assistance in the preparation of this article.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
