Deadline approaching: File CTA beneficial owner reports today

Companies qualifying as “reporting companies” under the Corporate Transparency Act (CTA) that were formed before 2024 have until December 31 to file their initial beneficial ownership information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN).

With this deadline fast approaching, it is vital for all companies to determine whether they have a filing requirement or fall under one or more of the twenty-three exemptions.

What is the Corporate Transparency Act?

The CTA went into effect on January 1, 2024 as part of FinCEN’s anti-money laundering efforts. The CTA requires all companies that are formed in the United States and all foreign companies that have registered to do business in a US state, each by the act of filing a formation or registration document with the office of the secretary of state (or similar state agency), to file a BOI report with FinCEN. 

The BOI report must identify the individuals exercising substantial control over the company and those having a 25 percent or more ownership interest in the company (such individuals being collectively referred to as “beneficial owners”). The company must also provide certain identifying information on each beneficial owner to FinCEN in connection with the BOI report. Individuals have the option to obtain a special FinCEN identification number that can be used to identify himself or herself as a beneficial owner across multiple BOI reports.

Companies formed on or after January 1, 2024 also have to provide BOI for the individuals responsible for forming or registering the business – the “company applicants.”

A more detailed review of the CTA and how it will impact small businesses and family offices can be found in, "The Corporate Transparency Act is here—are you ready?" and "What the CTA means for private investment funds and family offices."

Will beneficial ownership information be publicly available?

No, BOI is not publicly available, though it can be accessed by certain federal agencies, financial institutions or law enforcement officials for limited purposes. Read more about FinCEN’s establishment of a secure BOI database and access rules.

What is the status of court cases challenging the constitutionality of the Act?

Multiple lawsuits have been filed in federal courts across the United States arguing that the CTA is unconstitutional. In March 2024, the Federal Circuit Court for the Northern District of Alabama held in National Small Business United v. Yellen that the CTA was unconstitutional, but the CTA was only enjoined from being enforced against the plaintiffs in that case. That decision was appealed to the Eleventh Circuit and oral argument took place on September 27. The Eleventh Circuit is unlikely to rule before the December 31 deadline.

In late September, the United States District Court for the District of Oregon in Firestone v. Yellen denied a motion for preliminary injunction where the plaintiffs argued the unconstitutionality of the CTA, holding that the plaintiffs were unlikely to succeed on the merits because the CTA is within Congress’ power to regulate interstate commerce.

What should I do now?

Given the ongoing nature of the lawsuits and the developing split in holdings across the country, companies would do well to file their BOI reports ahead of the filing deadline to avoid the harsh penalties imposed under the CTA for noncompliance. Companies should conduct a thorough evaluation of compliance and reporting obligations for all entities within their organizational structure. Further, companies should review their governance documents and consider adding certain provisions to ensure the company can timely collect the necessary information from its beneficial owners.

Contact us if you are unsure whether your company has a filing obligation or need assistance identifying your beneficial owners.