Corporate Transparency Act Alert

Clients, Friends and Colleagues,

The purpose of this note is to alert our clients, friends and colleagues to new requirements for most closely held business entities (such as an LLC, limited partnership or corporation) to report the personal information of their beneficial owners to the US Treasury Department. If you do not directly or indirectly (e.g., with a spouse or through a trust) own or control 25% or more of a reporting company and if you do not exercise substantial control over a reporting company, then the new reporting obligations do not impact you.

You probably are already aware of the new ownership reporting mandates under the Corporate Transparency Act (CTA) which apply to practically every closely-held business entity in the country. The CTA requires non-exempt entities formed or registered in the U.S. prior to 2024 to file a beneficial ownership information (BOI) report by January 1, 2025. The CTA also requires entities formed or registered in 2024 to file a BOI report within 90 days after formation or registration and entities formed or registered after 2024 to file a BOI report within 30 days after formation or registration. Once filed, BOI reports must be updated within 30 days if there are changes in the information reported.

BOI reports require each “beneficial owner” to submit highly-sensitive information – their home address and date of birth, as well as a copy of their driver’s license, passport or other qualifying identification document. The term “beneficial owner” includes any person owning or controlling at least 25% of the reporting company’s ownership, as well as those with “substantial control” over the reporting company.

BOI reports must be filed electronically with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). There are steep, escalating fines and possible jail time for failure to file BOI reports. For more information about how to comply with the CTA, please visit:  www.fincen.gov/boi/small-business-resources.

You yourself can analyze whether an entity is required to file a report or is exempt and who meets the definition of a “beneficial owner”, and you can prepare and file any required BOI report directly with FinCEN or through a third-party vendor. DDRS may also be able to help you with those steps. If you want to engage DDRS to assist, please reach out to your primary contact within the firm or Matt Disco at disco@ddrs.com.  It will take some time to gather the necessary data, so if you would like our assistance, please reply by October 1, 2024. If the process is delayed, reports due by December 31, 2024 may not be submitted on time.

Respectfully,