If you own an interest in, or otherwise manage or control a business entity, this one is for you!
The Corporate Transparency Act (“CTA”) went into effect January 1, 2024. It requires new and existing entities to file information concerning their beneficial ownership information (“BOI”) with the Financial Crimes Enforcement Network (“FinCEN”) and requires that information stay up to date.
Initially signed into law in December 2020 as part of the National Defense Authorization Act, the CTA is a groundbreaking piece of legislation aimed at promoting transparency in corporate structures to combat money laundering, terrorist financing, and other illicit activities.
Timeline to File
Reporting companies created or registered to do business before January 1, 2024, have until December 31, 2024, to file their initial BOI report.
Reporting companies created or registered this year (Jan 1, 2024 – December 31, 2024) have 90 days to file their initial report.
Any Reporting company created or registered on or after January 1, 2025 must file their BOI report within 30 days.
What is a Reporting Company?
A Reporting Company is, for the most part, any entity that is formed by filing with any Secretary of State. That includes most Limited Liabilities Companies, Corporations, General Partnerships, and foreign entities with a US presence. There are very few exemptions, 23 to be exact. If your entity does not fall into one of these categories, you must file within the time frame specified above.
Who is a Beneficial Owner?
A beneficial owner is any individual who, directly or indirectly, exercises substantial control over a reporting company OR owns or controls at least 25% of the ownership interests of a reporting company.
An individual might be a beneficial owner through substantial control, ownership interests or both.
Failure to Report or Providing False Information
The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision or attempt to provide false or fraudulent beneficial ownership information may result in civil or criminal penalties, including civil penalties of up to $5000 PER DAY for each day the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine up to $10,000.
It is important to note, the requirement to ensure the timely filing of the reports does not just fall on the company. Senior officers of an entity that fail to file a required BOI report may be held accountable for that failure!
If you have questions about the reporting requirements of your organization or who may be considered a beneficial owner, book a consultation with Executive Legal Services and a member of our team would be happy to walk through your specific circumstance with you.
Executive Legal Services is a North Carolina law firm focusing in the areas of Employment, Business, Contracts and outside general counsel services.