In September 2022, the Corporate Transparency Act (the “CTA”) was enacted by Congress adopting new beneficial ownership information (“BOI”) reporting for many U.S. businesses.  The CTA applies to corporations, limited liability companies, and various partnerships.

There are a number of businesses that will be exempted from the filing requirements of the CTA, including banks, credit unions, securities brokers or dealers, insurance companies, tax exempts, and large operating companies.  Large operating companies are those with at least 20 full time employees, a physical location in the United States, and more than $5 million in gross receipts or sales in the prior taxable year.  All other companies must file a report disclosing information about both the entity and its beneficial owners.  Beneficial owners are all individuals (1) who substantially control the company or (2) who own or control at least 25 percent of the vote or value of the company.  The CTA requires that each beneficial owner provide their name, address, date of birth, and an image of their passport or driver’s license.

The CTA is effective as of January 1, 2024 and applies to all companies, even those created before January 1, 2024.  After January 1, 2024, newly-formed nonexempt businesses will have 30 calendar days to file their initial BOI report (an extension to 90 days has been proposed).  Also, any change in beneficial owner information must be filed within 30 calendar days of such change.  Examples of changes include when the business no longer qualifies for an exemption, when there is a change in certain ownership, or when there is a change to a beneficial owner’s personal information (i.e., name, address, or identifying document number).

Any person that willfully fails to file a BOI report or willfully provides false information on a BOI report is subject to a penalty of $500 for each day of violation, up to $10,000, and/or imprisonment of up to two years.

The BOI reports will not be publicly available.  Rather, the information will be available to law enforcement and banking institutions.

Takeaways

New businesses could have a BOI report due as soon as January 31, 2024.  These businesses will need to quickly determine whether they are exempt, and if not, to collect personal information for each beneficial owner.  The attorneys at Forchelli Deegan Terrana can advise whether your business will have a BOI reporting requirement, and we can assist with assembling sensitive personal information from owners and filing the BOI reports.

The BOI reports for existing businesses are due by January 1, 2025.  We can help businesses determine if  an exemption under the CTA applies, or wind-up inactive businesses so as to avoid additional administrative costs including BOI reporting.

This article was written by Rachel L. Partain, a partner in the firm’s Corporate and Mergers & Acquisitions practice group.

Should you have any questions regarding this topic, please reach out to Rachel L. Partain or call 516-248-1700.