Energy & Sustainability Compliance with the Corporate Transparency Act — October 2024
New for 2024, Compliance with the Corporate Transparency Act
Your Reporting Requirements under the Corporate Transparency Act
| Summary | The Corporate Transparency Act (CTA), enacted by Congress in an effort to combat money laundering and other illicit activities, requires a reporting company to report electronically through a secure filing system its beneficial ownership information (BOI) to a division of the US Treasury Department, the Financial Crimes Enforcement Network (FinCEN). |
| Who needs to file? | You must file a BOI report if you are a reporting company, defined as a domestic or foreign corporation, limited liability company, or other type of entity that was either formed or registered to do business in any state or jurisdiction and created by filing a document with a secretary of state or other similar office under the law of a State or Indian Tribe and which does not qualify for an exemption.[1] |
| What to file? | A reporting company’s BOI report must include the following information about itself, its beneficial owner(s), and, if formed on or after January 1, 2024, its company applicant(s):
A beneficial owner is any individual who, directly or indirectly, exercises substantial control[2]over the reporting company or owns or controls at least 25% of the ownership interests[3] of the reporting company. A reporting company will always have at least one individual with substantial control. A company applicant is (1) the individual who directly filed the document that formed/registered the reporting company, and (2) if applicable, the individual who was primarily responsible for directing or controlling the filing of the formation/registration document. No reporting company will have more than two company applicants. NOTE:Reporting companies and individuals may electronically apply for a FinCEN identifier, a unique identifying number provided by FinCEN, to streamline the reporting process. The same information outlined above must be provided when applying for a FinCEN identifier, but then the FinCEN identifier can be used on all BOI reports going forward in place of the otherwise required information. |
| When to file? | All reporting companies formed/registered on or after January 1, 2024 must file their BOI reports within 90 days of the company’s formation/registration. All reporting companies formed/registered before January 1, 2024 must file their BOI reports by January 1, 2025. Reporting companies must also update and correct information provided in their initial BOI reports within 30 days of a change to such information, and individuals must update and correct information provided in their FinCEN identifier applications. |
| How to file? | If you are required to file a BOI report for a reporting company, you must file it electronically through FinCEN’s secure filing system. |
| Why to file? | FinCEN has set significant penalties, including without limitation individual liability for beneficial owners, for:
Senior officers of a reporting company bear individual liability for reporting violations, in addition to the individual who actually caused such violations. |
| Resources | FinCEN Small Entity Compliance Guide |
[1] While you are receiving this reporting guidance as a courtesy and for general informational purposes only, you must consult your counsel engaged specifically to advise you regarding CTA requirements to determine if your entity qualifies for an exemption from the CTA’s reporting requirements. Please review the FinCEN Small Entity Compliance Guide for detailed information regarding the CTA’s numerous exemptions.
[2] An individual exercises substantial control over a reporting company if: (1) the individual is a senior officer, defined as any individual holding the position or exercising the authority of a president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer, regardless of official title, who performs a similar function; (2) the individual has authority to appoint or remove a senior officer certain officers or a majority of directors (or similar body) of the reporting company; (3) the individual is an important decision-maker regarding entity operations and activities; or (4) the individual has any other form of substantial control over the reporting company. [31 CFR § 1010.380(d)(1)]
[3] Any of the following may be an ownership interest: equity, stock, or voting rights; a capital or profit interest; convertible instruments, options, or other non-binding privileges to buy or sell any of the foregoing; and any other instrument, contract, or other mechanism used to establish ownership. A reporting company may have multiple types of ownership interests. [31 CFR § 1010.380(d)(2)]
Authors
David G. Adams
Member
