Corporate Transparency Act Begins January 1, 2024

The Corporate Transparency Act (CTA) will become effective as of January 1, 2024 and will require all companies to file a Beneficial Ownership Information (BOI) report with the US Treasury’s Financial Crimes Enforcement Network (FinCEN). The reporting will be done through an online portal. The purpose of this new law is to make transparent the controlling ownership interests of companies and thereby prevent illicit financial activities such as money laundering and financing terrorism. Essentially it is to make ownership information about small private companies accessible to law enforcement agencies who are investigating financial crimes. There are 23 exemptions to the filing requirement, but most closely held companies (small private) will not be exempt.

Key Points of the Corporate Transparency Act:
• Beneficial Ownership Reporting: The CTA mandates that starting January 1, 2024, all non-exempt companies in the U.S. are required to report information about their Beneficial Owners (BOs) and Company Applicants to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.
• Definition of Beneficial Owner: Beneficial owners are individuals who directly or indirectly own or control a significant percentage (at least 25 percent) of the company or exercise substantial control over it.
• Penalties for Non-Compliance: The Act imposes penalties, including fines and potential criminal charges, for willful non-compliance.
• Enhanced Law Enforcement Access: Information reported to FinCEN will be accessible to law enforcement agencies and certain federal agencies for the purpose of investigating illicit financial activities.
• Compliance Deadline:
o Existing companies created before January 1, 2024, have a one-year grace period from the bill’s effective date to meet the new compliance requirements.
o Companies created on or after January 1, 2024, must file an initial report within 30 calendar days of registration or formation.
• Exemptions: The Reporting Rule exempts 23 specific types of entities, as listed in the Small Entity Compliance Guide (Compliance Guide) created by FinCEN.