The Corporate Transparency Act: What to Know and What to Do

The Corporate Transparency Act (the “Act”) established a Beneficial Ownership Information (“BOI”) Reporting Rule that obligates certain entities to file a report with federally required reporting information (a “BOI Report”) with the Financial Crimes Enforcement Network of the United States Department of Treasury (“FinCEN”) beginning January 1, 2024.

Below is a summary chart concerning your likely reporting requirements under the Act. The chart is followed by a memorandum which provides information on: (1) who must file a BOI Report under the Act; (2) the consequences of failure to file a BOI Report; (3) what information is reported in a BOI Report; (4) requirements on updating BOI Report information; and (5) when all BOI Reports need to be filed with FinCEN.

As mentioned, Fraser Stryker (the “Firm”) is happy to assist your entity in meeting these obligations. If you would like the Firm to complete your BOI Report, please inform us as soon as possible.

I. Summary Chart of the Act

Summary: Federal Entity Reporting Obligations

Provided below are more in-depth discussions of the Act’s requirements which likely apply to your entity. Please contact the Firm with any questions or concerns.

II. Who Must File a BOI Report Under the Act?

Under the Act, a Reporting Company is an entity, domestic or foreign, subject to the Act. A Domestic Reporting Company is any corporation, LLC, or other similar entity that is created by filing a document with a secretary of state or with a similar state or tribal office. A Foreign Reporting Company is any entity that has registered to do business in the United States by filing a document with a secretary of state or any similar state or tribal office. This is a broad definition, meaning many entities will be considered Reporting Companies with obligations under the Act.

All entities qualifying as a Reporting Company must comply under the Act unless it falls within one of the twenty-three (23) exceptions. These exceptions cover entities that are already subject to substantial government regulation, including: banks; credit unions; tax-exempt entities; governmental authorities; public utilities; insurance companies; and large operating businesses.

In general, assume your entity is a Reporting Company under the Act. If you have questions regarding whether any of the exceptions apply to you, please contact the Firm and we will advise you on your reporting obligations.

III. What are the Consequences for Failure to File a BOI Report?

The Act establishes severe penalties for failing to provide accurate and updated information to FinCEN. Failure to file a BOI Report within the allotted time and failure to keep the information on file current may result in civil penalties of up to $500 per day for each violation or criminal penalties of up to $10,000 and imprisonment for up to two (2) years.

IV. What Information Must Be Included in the BOI Report?

Upon notice you would like the Firm to assist in your compliance with the Act, you will receive a form document requesting the required information. To determine whether you would like the Firm to handle your reporting obligation, below are brief descriptions of what will be included in your entity’s BOI Report.

A Reporting Company’s BOI Report must disclose information regarding three (3) different categories: (1) Reporting Company information; (2) Beneficial Ownership information; and (3) Company Applicant information.

a. Reporting Company Information

The Reporting Company must provide information about the entity itself; this includes but is not limited to: Full legal name; Any trade name/DBA; Complete and current principal place of business address; Jurisdiction of formation in the United States; and its Taxpayer Identification Number (TIN) and Employer Identification Number (EIN) (if applicable).

b. Beneficial Ownership Information

The Reporting Company must provide information about the entity’s Beneficial Owners. A Beneficial Owner is any individual who, directly or indirectly: (1) exercises substantial control over a Reporting Company and/or (2) owns or controls at least twenty-five (25%) of the ownership interests of the Reporting Company. A more comprehensive definition of what constitutes “substantial control” and “ownership interest” can be provided upon request.

Each Reporting Company may have more than one Beneficial Owner. For each Beneficial Owner, the entity will need to include in its BOI Report the Beneficial Owner’s: Full legal name; Date of birth; Complete current residential address; Unique identification number and its issuing jurisdiction; and an image of the document providing that unique identification number (i.e., state driver’s license, passport, etc.).

c. Company Applicant Information

All Reporting Companies created on or after January 1, 2024, are required to include information about the entities’ Company Applicant(s) in its BOI Report. All Reporting Companies created prior to January 1, 2024, are not required to report the entities’ Company Applicant(s).

Each Reporting Company will have at least one (1), and no more than two (2), Company Applicants. All Company Applicants must be individuals. There are two (2) types of Company Applicants: (1) the individual who directly filed the document that created a Domestic Reporting Company or registered the Foreign Reporting Company or (2) the individual who was primarily responsible for directing or controlling the filing of the creation or registration document, even if they did not actually file the document.

For each Company Applicant, the Reporting Company will need to include the same information as its Beneficial Owners in its BOI Report, except Company Applicants who form or register a company in the course of their business (e.g., Fraser Stryker PC LLO staff and attorneys) should use the business’ street address rather than a residential address.

V. Are There Requirements to Update BOI Reports?

In addition to filing an initial BOI Report, each Reporting Company must update and correct all reported information when necessary. For example, this includes any change regarding reported information on the Reporting Company, Beneficial Owner(s), and Company Applicant(s).

After any applicable change, the Reporting Company must file an updated BOI Report no later than thirty (30) days after the date on which the change occurred.

If a Reporting Company becomes aware of an inaccuracy in its filed BOI Report, the Reporting Company must correct it by filing a new BOI Report no later than thirty (30) days after the date the Reporting Company becomes aware of the inaccuracy or had reason to know of it.

This means your entity must monitor the accuracy and currency of all information provided in its BOI Report. If the Firm is managing your reporting obligations, you should communicate any and all updates to this information to the Firm immediately.

VI. When Do BOI Reports Need to be Filed?

A Reporting Company created or registered before January 1, 2024, must file its initial BOI Report no later than January 1, 2025. A Reporting Company created in 2024, must file its initial BOI Report within ninety (90) calendar days of whichever date occurs first: (a) the date the Reporting Company receives actual notice its creation is effective, or (b) the date a secretary of state or a similar state or tribal office first provides public notice of the Reporting Company’s creation. A Reporting Company created on or after January 1, 2025, must file its initial BOI Report within thirty (30) calendar days of whichever date occurs first: (a) the date the Reporting Company receives actual notice its creation is effective, or (b) the date a secretary of state or similar state or tribal office first provides public notice of the Reporting Company’s creation.

A Reporting Company will file its BOI Report, as well as any corrected or updated reports, electronically through FinCEN’s website. FinCEN has indicated that this filing system will be a secure database and all filings are free of cost.

Authors: Mark L. Brasee, Paul J. Halbur, Karsen E. Sims, Tammi J. Jacobsen