CORPORATE TRANSPARENCY LAW IMPOSES NEW REPORTING OBLIGATIONS ON MOST COMPANIES

A new Federal law, the Corporate Transparency Act, went into effect January 1, 2024, requiring most domestic and foreign companies to report their beneficial ownership to the Financial Crimes Enforcement Network (“FinCEN”), unless the company qualifies as an exempt entity. Reporting is accomplished by filing a Beneficial Ownership Information Report (“BOIR”), which can be done online through the FinCEN website. A “Beneficial Owner” is defined as any individual who exercises substantial control over the company or owns or controls at least 25% of the ownership interest, and does not meet any of the five exceptions to the definition, namely (1) minor children, (2) nominee, intermediary, custodian, or agent, (3) employee, (4) inheritor, or (5) creditor.

As companies prepare to file their BOIR, they should have available the full legal name of the company, any trade names or DBAs, current address of the principal place of business, jurisdiction of formation, and Taxpayer Identification Number (TIN).  For each Beneficial Owner, the BOIR also calls for that person’s legal name, date of birth, current address, and a copy of their government-issued photo ID, showing its unique identification number and the jurisdiction where issued. For companies created or registered on or after January 1, 2024, the BOIR must also include the same information for the individual who filed or was responsible for directing or controlling the filing of the formation or registration documents of the entity.

The statute requires that information reported to FinCEN be stored in a secure, non-public database and will only be available to Federal, State, Local and certain foreign government officials who submit a request through a U.S. Federal government agency for authorized activities related to national security, intelligence, and law enforcement.

The deadline to file a BOIR is based on the date the company was formed. Companies formed prior to January 1, 2024 must file a BOIR by January 1, 2025. Companies formed on or after January 1, 2024 but prior to January 1, 2025 are required to file a BOIR within 90 calendar days of receiving confirmation of the company’s formation. And companies formed on or after January 1, 2025 are required to file a BOIR within 30 calendar days of receiving confirmation of the company’s formation. Any updated or corrected reports must be filed within 30 calendar days after the change occurs or knowledge of an inaccuracy. Willful failure to comply with the reporting requirements can result in civil and/or criminal penalties.

It is important to note that New York recently enacted similar reporting requirements under the LLC Transparency Act, which will take effect on January 1, 2025. Under this Act, beneficial ownership information for New York limited liabilities companies must be reported to the Secretary of State.

For more information concerning the Corporate Transparency Act and your company’s compliance obligations under it, please contact David Handsman (914-287-6126; dhandsman@bpslaw.com), or Sabrina Blefgen (914-287-6149; sblefgen@bpslaw.com).