The Corporate Transparency Act (CTA) went into effect on January 1, 2024. The CTA aims to prevent individuals from maliciously and intentionally using U.S. entities and businesses to facilitate illegal operations and illicit activity, such as tax fraud, tax evasion, money laundering, and financing for terrorism. 

Under the CTA, businesses meeting certain criteria must submit a Beneficial Ownership Information (BOI) Report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). This report captures information about a business’s beneficial owners and individuals who have substantial controlling interests with the company. Most owners of closely-held businesses will need to comply with this requirement. 

What Constitutes a Beneficial Owner under the CTA? 

An individual qualifies as a beneficial owner if they directly or indirectly have a significant ownership stake in a company. A person would be considered a beneficial owner if they: 

• Have a major influence on the reporting company’s decisions or operations. 
• Owns at least 25% of the company’s shares, or 
• Have a similar level of control over the company’s equity. 

What Businesses Must File a BOI Report? 

In general, the CTA applies to any entity that had to file or register with the Secretary of State or its equivalent in order to do business in the state or other municipality. 

Companies required to file a BOI Report to FinCEN include corporations, Limited Liability Companies (LLCs), limited partnerships, and other entities that are registered with the Secretary of State or a similar state or local government agency, as well as foreign entities registered to do business in the United States.  

Earlier this year, we shared a News Alert about these new legal requirements and the basics of compliance. If a trust holds an interest in a company that is required to file BOI reports, the trust may need to provide information about the beneficial owners of the trust. The beneficial owners of a trust include: 

1. Any trustee or individual who has the authority to dispose of trust assets. 
2. Any trust beneficiaries who are the sole permissible recipients of trust income and/or principal or who can demand distributions or withdrawals of substantially all the trust’s assets; and 
3. Any trust creator (grantor, settlor, donor, or trustor) with the right to revoke or withdraw all the assets from the trust. 

What is the Deadline for Filing a BOI Report? 

For most eligible businesses that were created prior to January 1, 2024, the filing deadline for the BOI is January 1, 2025.  

For businesses created after January 1, 2024, the due date for the BOI Report will depend on the date that the company registers with its Secretary of State or other governing body. 

Businesses or entities created prior to January 1, 2024, that fail to file or update their information by the January 1, 2025, deadline could face up to two years imprisonment and fines up to $10,000, in addition to civil penalties of up to $591 per day.  

We recommend seeking the advice of your own independent legal counsel on your potential CTA reporting obligations. To contact the estate planning attorneys at Morgan & DiSalvo for general direction on the CTA, please call (678) 720-0750 or email info@morgandisalvo.com.