Starting January 1, 2024, certain business entities will need to comply with new reporting requirements under the federal Corporate Transparency Act.
The Act requires certain companies to report information to the Financial Crimes Enforcement Network (“FinCEN”) regarding the identities of their beneficial owners, which include persons who own at least 25% of the company and persons who exercise substantial control over the company. See attached labeled Chart 3, from the FinCEN Small Entity Compliance Guide, which can be found on FinCEN’s website at www.fincen.gov (“FinCEN Guidance”)[1]. Entities which are formed on or after January 1, 2024 will also be required to report information about “company applicants”, defined as those who directly make the filing to form the entity with the Secretary of State and the person who oversees the filing.[2]
Entities required to report to FinCEN (“reporting companies”) include corporations, LLCs, and other entities that are created by a filing with the Secretary of State, and that do not fall within an exemption. Exempt companies include those listed on the attached labeled Chart 2 from the FinCEN Guidance. These companies are not required to report.[3] Exemptions generally include regulated companies that report under other law, and as well as “large operating companies” having more than 20 employees, a physical office in the US, and reported US revenue of more than $5M.
In the event that your company is a reporting company, the following information regarding beneficial owners and company applicants, if applicable, must be reported to FinCEN (also see attached labeled Chart 7 from the FinCEN Guidance): [4]
- Full legal name.
- Date of birth.
- Residential street addresses of beneficial owners; business street addresses of company applicants as of date the report is delivered.
- Identification number from US passport, driver’s license, state or local identification document, or foreign passport; or FinCEN identification number.
- Copy of document from which identification number is used.
Reporting companies must take steps to ensure compliance with the Act and file the relevant report with FinCEN within the following time frames:[5]
- Within 30 days if the company is formed or registered on or after January 1, 2024. (On September 28, 2023, FinCEN issued a Notice of Proposed Rulemaking potentially extending the time frame to 90 days for entities formed between January 1, 2024 and January 1, 2025.)[6]
- By January 1, 2025, if the company was formed or registered prior to January 1, 2024.
- Within 30 days of changes in either the beneficial ownership of the reporting company, or of the information about those beneficial owners.
The report must be filed electronically through a secure filing system, which is currently under development and will not be available until January 1, 2024. FinCEN will not accept reports before January 1, 2024, and will publish instructions and other technical guidance on how to complete the reporting form at www.fincen.gov/boi. The information will be stored in a non-public, secure, centralized database (the “Beneficial Ownership Secure System” or “BOSS”), accessible by federal agencies and law enforcement only.[7]
Penalties for willful violation of the Act include fines of up to $500 per day of non-compliance and/or imprisonment for up to two years.[8]
Also please note that FinCEN has issued the following Fraud Alert:
FinCEN has been notified of recent fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act. The fraudulent correspondence may be titled “Important Compliance Notice” and asks the recipient to click on a URL or to scan a QR code. Those emails and letters are fraudulent. FinCEN does not send unsolicited requests. Please do not respond to these fraudulent messages, or click on any links or scan any QR codes within them.
If you have any questions or concerns, please contact Joanna Williams, Corporate Paralegal at (207) 947-0111 or jwilliams@eatonpeabody.com
[1] 31 U.S.C. § 5336 (a)(3)(A)
[2] Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59498 (September 30, 2022). https://www.govinfo.gov/content/pkg/FR-2022-09-30/pdf/2022-21020.pdf
[3] 31 U.S.C. § 5336 (a)(11)
[4] 31 U.S.C. § 5336 (b)(2)(A)
[5] 87 Fed. Reg. 59509
[6] 88 Fed. Reg. 66730
[7] Id. at 59508
[8] 31 U.S.C. § 5336 (d)(3)(A)