The Corporate Transparency Act: Key Deadlines and Compliance Essentials for Reporting Companies
Author: Destiny Aigbe
November 15, 2024
The Corporate Transparency Act (CTA), effective January 1, 2024, marks a significant step in combating money laundering, terrorist financing, and other financial crimes. As the January 1, 2025, deadline approaches for entities formed before January 1, 2024, to file their Beneficial Ownership Information Report (BOIR) with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), understanding the CTA’s requirements is crucial for compliance.
What is the Corporate Transparency Act (CTA)?
The CTA mandates increased transparency by requiring entities meeting the definition of a "reporting company" to file a BOIR disclosing information about their owners and individuals exercising substantial control. The legislation aims to enhance financial oversight while balancing privacy and regulatory compliance.
Who Must File a BOIR?
Entities qualifying as a "reporting company" include:
- Domestic Entities: Corporations, LLCs, or other entities created by filing formation documents with a U.S. Secretary of State.
- Foreign Entities: Companies registered to do business in the U.S.
Certain exemptions apply, such as public companies, large operating companies meeting specific criteria, and tax-exempt entities. Companies not qualifying for exemptions must comply with BOIR filing requirements.
Key Deadlines
- Entities formed before January 1, 2024: File by January 1, 2025.
- Entities formed between January 1 and December 31, 2024: File within 90 days of formation.
- Entities formed on or after January 1, 2025: File within 30 days of formation.
Penalties for Non-Compliance
Failure to comply can result in:
- Civil penalties of up to $591 per day (adjusted for inflation).
- Criminal penalties, including fines up to $10,000 and/or two years of imprisonment.
What Information is Required?
For Reporting Companies:
- Name, trade names/DBAs, principal business address, state of formation, and Taxpayer Identification Number (TIN).
For Beneficial Owners:
- Full legal name, date of birth, residential address, ID details (e.g., passport, driver’s license), and an image of the ID.
Beneficial owners include individuals with substantial control or owning 25% or more of the reporting company. Exceptions apply to minors, nominees, employees, creditors, and inheritors.
Updates and Corrections
Reporting companies must update BOIRs within 30 days of any changes to reported information. Corrections must also be made within 30 days of discovering inaccuracies.
Recent Litigation Updates
The CTA has faced constitutional challenges in federal and state courts. While some courts have ruled against the CTA for specific plaintiffs, the Act remains enforceable nationwide, with litigation ongoing. Reporting companies should adhere to compliance deadlines to avoid penalties.
Conclusion
With the CTA's deadlines approaching, businesses must act now to determine their reporting obligations, gather required information, and ensure timely compliance. Companies should seek legal counsel to navigate exemptions and mitigate risks associated with the Act.
About the Author
Destiny Aigbe
Managing Partner
Aigbe Law PLLC | Dark Alpha Capital
A Corporate and Securities Law Firm
With a robust foundation in law and finance, Destiny Aigbe has carved a distinguished career, underpinned by his pivotal role in orchestrating and managing complex transactions that have propelled companies to significant growth and market prominence. As a seasoned attorney and strategic advisor, Destiny has been instrumental in facilitating over $75 million in capital raises, demonstrating a keen acumen for securing funding and fostering investor confidence.
Destiny's leadership in the execution of six successful public listings, through meticulously structured reverse mergers and registration statements, showcases his adeptness in navigating the intricacies of the public markets and his capacity to guide companies through transformative growth phases. His involvement in five mergers as an operator further illustrates his versatile skill set, extending beyond legal expertise to include hands-on management and operational strategy, though these ventures did not involve funding.
Destiny's professional journey is marked by a commitment to excellence and a diverse range of experiences, from representing a wide spectrum of clients including public and private companies, and investment firms, to holding significant roles within the US government. His tenure with the US Department of State and the National Institutes of Health highlights his adaptability and his contribution to the advancement of entrepreneurial ventures in sectors like biotechnology and nanotechnology through strategic funding initiatives.
An alumnus of Vanderbilt University Law School, Destiny focused on Finance and Mergers & Acquisitions, further honing his expertise with a certificate in Law and Business. His foundational education in Finance was obtained with honors from the University of Maryland's Robert H. Smith School of Business, which laid the groundwork for his subsequent achievements in investment banking and legal practice.
Residing in the Washington, D.C. area, Destiny Aigbe continues to leverage his extensive experience and insightful leadership to drive innovation, growth, and success for his clients and the ventures he is involved with.
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