On January 1, 2021, Congress enacted the Corporate Transparency Act (“CTA”), representing the greatest reformation of the Bank Secrecy Act and related anti-money laundering rules since the enactment of the U.S. Patriot Act.  The purpose of the CTA is to assist the federal government, through the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”), to address and guard against the millions of small and/or shell companies created whose true purpose is to launder money, finance terrorism, and other forms of illegal activities masquerading through otherwise legitimate entities.  The CTA therefore authorizes FinCEN to collect and disclose certain information to authorized government agencies and to financial institutions under various circumstances.

What does this mean for me as a small business owner?
As of January 1, 2024, all businesses which do not meet an enumerated exception under the CTA must file a Beneficial Ownership Information (“BOI”) report with FinCEN.  Entities required to comply with the CTA (known as “Reporting Companies”) include corporations, LLCs, other types of companies (such as general partnerships, limited partnerships, limited liability partnerships, etc.), and any other type of business organization which is (or was) created through a filing with the Secretary of State of any State, Territory, or Tribal Authority in the U.S.  Foreign companies which are registered to do business in the U.S. through the filing with a Secretary of State are also required to file a BOI report.  The BOI report requires any Reporting Company to provide basic information about the entity but also certain information of the Reporting Company’s “beneficial owner.”

What is a “Beneficial Owner” for purposes of the CTA?
The CTA defines a “Beneficial Owner” as any individual who directly or indirectly owns at least 25% or more of the Reporting Company’s ownership interests or an individual who exercises “substantial control” over the Reporting Company.  An individual is deemed to exercise “substantial control” if the individual (1) serves as a senior officer of the company (such as President, Chief Financial Officer, General Counsel, Chief Executive Officer, or Chief Operating Officer, or its equivalent); (2) has authority over the appointment or removal of any senior officer or a majority of the company’s board of directors; or (3) directs, determines, or has substantial influence over important decisions made by the Reporting Company, including decisions regarding the company’s business, finances, or structure.  Because the CTA contains a very broad definition for “substantial control” over a Reporting Company, it is critically important that you seek legal guidance as to who must be included in the company’s BOI report.

By when do I need to file my BOI report?
The CTA’s reporting requirements are phased-in through three stages: (1) all companies which were created prior to January 1, 2024, and are otherwise not exempt must file their BOI report by no later than December 31, 2024; (2) all companies created after January 1, 2024, must file their BOI report within 90 days of the date the entity is created; and (3) all companies created after January 1, 2025, must file their BOI report within 30 days of the date the entity is created

What happens if I don’t file my BOI report timely?
Reporting Companies that fail to timely file their BOI report are subject to a civil fine of $500 per day that the company is in noncompliance.  The CTA also contains criminal penalties for Reporting Companies who are determined to have willfully failed to comply, including a penalty of up to $10,000.00 and a maximum sentence of 2 years in prison.  Importantly, these penalties and criminal jeopardy can be imposed on senior officers of a Reporting Company.


What should I do now?
Don’t wait until the last minute to file your company’s BOI report.  Take action now to file your BOI report to avoid any potential penalties for an untimely filing.  We’re here to assist you with your reporting obligations!  In addition to timely filing your BOI report, it is highly recommended that you take the time to review all your organizational documents such as shareholder agreements, by-laws, operating agreements, partnership agreements, etc.  These documents should be updated to require any current or future “beneficial owner” to provide their identifying information as necessary for the company to meet its continual reporting requirements under the CTA.

Call us today at (772) 261-5080 to assist you with submitting your company’s BOI report and to review and update as necessary your company’s organizational documents.  We’re here to help you stay in compliance with federal law!