There is a significant regulatory development that may impact your business operations—the Corporate Transparency Act (“CTA”). Enacted as part of the National Defense Authorization Act for Fiscal Year 2021, the Corporate Transparency Act introduces new reporting requirements for beneficial ownership information (“BOI”), aimed at enhancing corporate transparency and preventing financial crimes.

Overview of the Corporate Transparency Act

The Corporate Transparency Act mandates that certain entities disclose BOI to the Financial Crimes Enforcement Network (“FinCEN”). This information pertains to individuals who directly or indirectly own or control a significant interest in the company.

Reporting Requirements for Entities Formed Before 2024

For entities formed before 2024, there is a retrospective reporting obligation.

Existing companies that fall within the scope of the CTA are required to submit BOI to FinCEN.

The information to be reported includes details about individuals holding at least a 25% ownership interest in the company or exercising substantial control over the entity.

Reporting Requirements for Entities Formed After 2024

Companies formed after the enactment of the Corporate Transparency Act must adhere to the reporting requirements from their inception. BOI, as defined by the Corporate Transparency Act, must be submitted to FinCEN within the specified deadlines.

What Must Be Reported

The Information to Be Reported Includes:

• Names, addresses (business and residential), and birthdates of beneficial owners
• Unique identification numbers for beneficial owners (i.e. passports and driver license)
• Details of ownership or control percentage

Reporting Deadlines:

The deadlines for information reporting are subject to regulatory updates, and we recommend staying informed about any changes. Currently, reporting entities formed between January 1, 2024 and December 31, 2024 must file their initial information to FinCEN within 90 days of receiving actual or public notice of the entity’s creation or registration, whichever is earlier.

Reporting entities created on or after January 1, 2025, will have 30 days within which to make the required filing. Reporting entities created before January 1, 2024, must file their BOI report by January 1, 2025.

It is crucial to comply with these reporting requirements to ensure regulatory compliance and avoid potential penalties for non-compliance.

Potential Penalties

A willful failure to report complete or updated BOI to FinCEN, or the willful provision of or attempt to provide false or fraudulent BOI may result in civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties, including imprisonment of up to two years and/or a fine of up to $10,000.

A person may be subject to civil and/or criminal penalties for willfully causing a Reporting Company not to file a required report or to report incomplete or false BOI.

Solutions

We are happy to assist your company in meeting the regulatory requirements set forth in the Corporate Transparency Act. If you have any questions or concerns regarding the Corporate Transparency Act or its impact on your business, please do not hesitate to call our office at 626-568-9300 or email our Corporate Transparency Act team at CTA@kjmlaw.com. We are committed to assisting you in navigating these regulatory changes seamlessly.