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On January 1, 2024, the Corporate Transparency Act (CTA) went into effect. The CTA aims to combat illicit financial activity and enhance national security interests by requiring certain entities to file beneficial ownership information reports (BOI Reports) with the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
The CTA applies to many types of entities including limited liability companies (LLCs)–even single-member LLCs–but it does not apply to the type of trusts that are typically created for estate planning purposes or tax-exempt entities. It does apply to trusts created by filing with a secretary of state (or similar office) under the laws of a U.S. state or Tribal jurisdiction, and foreign trusts registered to do business in any U.S. state or Tribal jurisdiction.
New York has followed suit, enacting the New York LLC Transparency Act (NYLTA) to amend New York’s LLC law to require the disclosure of beneficial ownership information. NYLTA will be effective on December 21, 2024.
The reporting requirements apply to the following corporations, limited liability companies and other similar entities (Reporting Companies) that do not qualify for one of the CTA’s 23 specific exemptions (the most relevant of which are described below).
There are two types of Reporting Companies:
Exempt Entities Include (but are not limited to): (a) entities that: (i) have more than 20 full-time employees in the U.S.; (ii) report more than $5 million in annual U.S. revenue for the previous year; and (iii) operate out of a physical location in the U.S.; (b) SEC-registered issuers; (c) tax-exempt entities; (d) certain financial institutions; (e) certain inactive entities; and (f) domestic pooled investment vehicles.
Reporting Companies must disclose the following information in their initial BOI Report and must file updated or corrected information (other than Company Applicant information) within 30 calendar days after the date on which the change to such information occurred:
Note that Reporting Companies, Beneficial Owners and Company Applicants may obtain a unique FinCEN identifier through https://fincenid.fincen.gov/landing, and the Reporting Company may report that number, instead of all of the above information, each time it files. FinCEN identifier information must be updated or corrected no later than 30 calendar days after the date on which the change to such information occurred.
BOI Reports are submitted electronically through https://boiefiling.fincen.gov/fileboir.
The willful failure to report complete or updated information in a BOI Report, or the willful provision of, or attempt to provide, false or fraudulent information in a BOI Report, may result in civil penalties (up to $500 per day that the violation continues) or even criminal penalties (imprisonment for up to 2 years and/or a fine of up to $10,000). Senior officers of a Reporting Company that fail to file a required BOI Report may be held accountable for that failure.
The CTA provides a safe harbor from penalty for inaccurate information in a BOI Report if such information is corrected within 90 calendar days of the deadline for filing the original BOI Report.
If you have any questions regarding these new reporting requirements, or if you would like us to assist with filing a BOI Report, please contact the Private Client Team.