If your organization is among the many business entities subject to the Corporate Transparency Act, you will soon have to begin gathering the beneficial owner information required by the legislation. When the year turns, the clock starts running down, giving you up to a year to file your report to the Financial Crimes Enforcement Network. Should you miss your deadline, your business may face potentially steep penalties and even imprisonment if you’re found to be in willful violation. 

Below is an overview of the key dates and deadlines under the CTA to aid your business in timely compliance.

Key Takeaways:

• The CTA goes into effect on Jan. 1, 2024. 
• Reporting companies created after the effective date have one year to file their initial BOI report to FinCEN.
• Companies created in 2024 have 30 days from their creation date to file their BOI reports. In September 2023, however, FinCEN proposed extending the deadline to 90 days, though a resolution has yet to be announced as of mid-October 2023.
• BOI reports must be filed through a secure online filing system developed by FinCEN. The system is still under development as of mid-October 2023, but FinCEN has announced that it will be launched by the time reports are due.
• The penalties for noncompliance include $500 a day for each day the violation continues (up to $10,000), up to two years imprisonment, or both.
• Companies that make changes or corrections to their initial BOI report must file updated reports with FinCEN. The deadline for the updated reports is 30 days from the modification.

An Overview of Important Terms

Before we discuss the key dates and deadlines of the CTA, it’s important to review some of the important terms to understand the requirements you must meet fully. 

Reporting Company

A reporting company is a business entity subject to the CTA’s requirements. The legislation itself recognizes two types of reporting companies:

• Domestic: “corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.”
• Foreign: “entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the U.S. by the filing of a document with a secretary of state or any similar office.”

In its filing with FinCEN, every reporting company must include its name, trade names (if applicable), address, jurisdiction of formation (or first registration), and taxpayer identification number (or foreign equivalent).

Please note that FinCEN also specifies 23 exceptions to the reporting requirement. Take our online quiz to determine whether you qualify as a reporting company or an exception.

Beneficial Owner

In a reporting company, a beneficial owner is anyone who, directly or indirectly:

• Exercises substantial control over the company.
• Has at least 25% ownership interest in the company.

For every beneficial owner of a reporting company, the BOI report to FinCEN must include their name, date of birth, current residential address, a unique identifying number (such as a passport number), and a scanned copy of photo identification.

FinCEN has specified exceptions from the beneficial owner definition. Chapter 2 of FinCEN’s Small Entity Compliance Guide provides more information about beneficial owners and substantial control.

Company Applicant

A company applicant is an individual who directly filed the document creating a reporting company with the secretary of state or similar office or someone who directed or controlled the filing. Business entities that meet either of the following criteria must identify and report one to two company applicants in their reports to FinCEN:

• Domestic reporting companies created on or after Jan. 1, 2024.
• Foreign reporting companies whose first registration to conduct business in the U.S. is on or after Jan. 1. 2024.

The filing information for company applicants is the same as that of beneficial owners, except the address must be a business address.

The Key Dates and Deadlines of the CTA

Refer to the sections below to stay informed about the key dates and deadlines of the CTA as of mid-October 2023:

Effective Date and Filing Deadlines

The first key date to remember is Jan. 1, 2024, when the CTA goes into effect. Reporting companies created before this date have until Jan. 1, 2025 — one year from the effective date — to file their initial BOI reports with FinCEN. Companies created after the effective date have 30 days after their creation date to meet the reporting requirement. 

A failure to comply with the reporting requirement within the stated deadlines may result in a civil fine of $500 a day for each day the violation continues (up to $10,000), up to two years imprisonment, or both.

Potential Deadline Extension: From 30 to 90 Days

On Sept. 27, 2023, FinCEN proposed a longer deadline of 90 days for reporting companies formed in 2024. The stated reason for the proposal is to provide newly formed reporting companies with more time to understand the reporting requirements, gather the necessary BOI, and file their reports. There’s been no resolution to the proposal as of mid-October, but final confirmation should arrive in the last week of October. 

Keep in mind that we may see further extensions to the existing deadlines if FinCEN operates behind schedule in its CTA implementation timeline.

Launch of FinCEN’s Filing System: To Be Announced

Reporting companies must submit their BOI reports through FinCEN’s secure online filing system. In a notice issued on Mar. 24, 2023, FinCEN announced that the system is currently under development but will be available before reports must be filed. Once the system is launched, it will be available on FinCEN’s website.

Updated Reports: 30-Day Deadline

If a reporting company experiences any changes concerning its beneficial owners or BOI report, it must file an updated report reflecting the new BOI. Some likely instances that would require updated reports are:

• A beneficial owner changes their name.
• A beneficial owner changes their address.
• The reporting company has a new beneficial owner.
• The reporting company notices a need to correct its initial report.

In such instances, the deadline to file the updated report is 30 days from the correction or change.

Other than the need to file updated reports, there’s no ongoing filing requirement under the CTA. So, a company that undergoes no changes to its BOI does not need to submit additional reports after its initial filing.

Remember, if you qualify as a reporting company, your compliance with the CTA is essential to avoid the associated civil and criminal penalties. For guidance and information about the reporting requirements, process, or any related matter, please contact us at Anderson Advisors.