CTA Filing Requirements for New and Existing Business Entities

November 12, 2024

**UPDATE as of March 3, 2025**

CTA reporting is still on, but no penalties for now. Based on recent statements from the U.S. Department of the Treasury and FinCEN, companies that do not make BOI filings by the current deadline of March 21, 2025 will not face penalties or fines. However, the filing deadline itself has not been changed at this time. Both FinCEN and Treasury have said that new rules and/or deadlines will be forthcoming: FinCEN has promised to issue a new rule prior to March 21st to extend the deadline, and Treasury stated that it will issue a proposed rulemaking to narrow the CTA to only apply to foreign reporting companies. The filing website is still open, and if the promised extension is not in place prior to March 21st, companies may still want to file their BOIs to ensure they remain in compliance, regardless of whether the agencies would pursue penalties.

**UPDATE as of February 19, 2025**

CTA reporting is back (again). On February 18, 2025, the U.S. District Court for the Eastern District of Texas stayed a nationwide preliminary injunction of the CTA reporting requirements. This follows a January 23, 2025 Supreme Court ruling that stayed a similar nationwide preliminary injunction. Together, this means that the CTA reporting obligations are back in effect. FinCEN has set new deadlines for reporting, and has stated that it will consider making additional changes to the reporting deadlines. We will post an update if there are further extensions. The current deadlines are as follows:

    • Companies created or registered prior to January 1, 2024: File by March 21, 2025.
    • Companies created or registered on or before February 19, 2025: File by March 21, 2025.
    • Companies that need to file corrected or updated BOI Reports: File by March 21, 2025.
    • Companies created or registered after February 19, 2025: File BOI report no later than 30 days after registration.
    • Companies that qualify for disaster relief may have extended deadlines that fall beyond March 21, 2025. These dates are on the FinCEN website, and companies should abide by whichever deadline falls later.

**UPDATE as of December 27, 2024**

The 5th Circuit vacated the stay of the preliminary injunction, meaning that the injunction is back in place, and reporting companies are not required to file BOI reports. Companies can still file voluntarily, and are advised to continue gathering any necessary information so they are prepared to file in the event the injunction is lifted. If the injunction is lifted, compliance deadlines may come back into effect with short notice. Please keep following along, as things are changing on a daily basis.

**UPDATE as of December 23, 2024**

The 5th Circuit stayed the preliminary injunction, meaning that the CTA compliance deadlines were again in effect, requiring all reporting entities to file within the original deadlines. FinCEN then set out new deadlines, extending the timeframe. These are as follows:

    • Companies created or registered prior to January 1, 2024: file by January 13, 2025.
    • Companies created or registered on or after September 4, 2024 that had a filing deadline between December 3, 2024 and December 23, 2024: file by January 13, 2025.
    • Companies created or registered on or after December 3, 2024 and on or before December 23, 2024 have an additional 21 days from their original filing deadline.
    • Companies that qualify for disaster relief may have extended deadlines that fall beyond January 13, 2025. These dates are on the FinCEN website, and companies should abide by whichever deadline falls later.

**UPDATE as of December 4, 2024**

On December 3, 2024, the U.S. District Court for the Eastern District of Texas granted a nationwide preliminary injunction that enjoins the federal government from enforcing the Corporate Transparency Act (the CTA). Under the preliminary injunction, reporting companies are not required to comply with the CTA deadlines, and the Government is forbidden from any enforcement actions under the CTA. Please note that the preliminary injunction is not a final decision, and the injunction can be overturned on appeal or if the Government successfully defends the case. We recommend that you still file the BOI report or have all the information ready to file the BOI report in case the injunction is overturned with a short window to come into compliance.

Beneficial Ownership Information Report

What is it? The Corporate Transparency Act (“CTA”) is part of the National Defense Authorization Act for Fiscal Year 2021. It is intended to enhance transparency in entity ownership to prevent money laundering, tax fraud, and other deceptive and illicit practices. The CTA requires most existing and new entities in the United States to file Beneficial Ownership Information (“BOI”) reports with the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”). The CTA reporting requirements became effective on January 1, 2024. Outlined below is an overview of the reporting requirements.

Why do I care? If you are a business organized or registered in the United States, you very likely have a reporting requirement under the CTA. The reports are time sensitive, and there are some significant penalties for failing to file. Owners and officers also need to pay attention, because they can be subject to individual penalties if the report is not timely and accurately filed, or if they refuse to provide their reporting information to the company.

What do I need to do? You need to file a beneficial ownership report with FinCEN on the following schedule:

If the Company was registered on or prior to December 31, 2023: File BOI report no later than January 1, 2025.

If the Company was registered from January 1, 2024 through December 31, 2024: File BOI report no later than 90 days after registration.

If the Company is registered on or after January 1, 2025: File BOI report no later than 30 days after registration.

How do I file? You can file yourself or you can use a service company to help you file. If you want to file yourself, you can go to FinCEN’s website at https://www.fincen.gov/boi. There are forms and instructions online. If you want additional help to file, you can use a service company, which will help guide you through the process and complete the filing for a fee.

Does this apply to me? Domestic and foreign “reporting companies” must file a report. This includes any entity that is a corporation, a limited liability company, or otherwise created or registered to do business by the filing of a document with a secretary of state or similar office, including foreign companies registered to do business in the United States. FinCEN estimates this includes 32.6 million entities, with another 5 million companies added annually. There are 23 categories of entities that are exempt. Notable exemptions include publicly-traded companies, financial institutions, investment advisors, tax-exempt entities, and inactive entities. A particular exemption of note is “large operating companies,” which are companies that employ more than 20 full-time employees in the U.S., operate at a physical address in the U.S., and have filed a federal tax return for the previous year reporting gross receipts or sales of more than $5 million.

Is this an annual filing obligation? No, you only have to file once for each entity, BUT you must amend the report any time any information changes. Changes requiring an updated report include new business names, changes in beneficial owners, and any change to information about the beneficial owners. Amendments must be filed within 30 calendar days after the date on which the change occurs.

What information goes in the report?

The BOI report will have two or three main sections: (1) the reporting company, (2) the beneficial owners, and, if created on or after January 1, 2024, (3) the company applicants.

1. Reporting Company:

    • Full legal name
    • Any trade name or “doing business as” (d/b/a) name
    • IRS Tax Identification Number
    • Jurisdiction of formation
    • Current address of the principal place of business

2. Beneficial Owner(s) (owners/officers/decision-makers):

    • Full legal name
    • Date of birth
    • Current residential address
    • Identifying document (ex. U.S. Passport, Driver’s License)
      • Identifying number
      • Identifying document image

3. Company Applicant(s) (those who file the registration):

    • Full legal name
    • Date of birth
    • Current residential address (business address only if the applicant works in corporate formation like an attorney or formation agent)
    • Identifying document (ex. U.S. Passport, Driver’s License)
      • Identifying number
      • Identifying document image

Is there a shortcut for getting all of this information from owners, officers and company applicants?

Yes. Each person that would fall under one of the above categories can obtain a FinCEN ID number. They would input their own information into the FinCEN database and receive an ID number. They would then provide the ID number to the company to use on the BOI report. This makes it much easier for the company to file the BOI report without asking owners and officers for their personal information. Whenever the individual’s personal information changes (like their address), they would update that information in the FinCEN database, rather than the company needing to file an amendment. Each individual can obtain their FinCEN ID at the following website: https://fincenid.fincen.gov.

What is a Beneficial Owner or a Company Applicant? This can be very fact specific, but in general:

Beneficial Owner

A beneficial owner is an individual who, directly or indirectly, exercises substantial control over the company, or owns or controls at least 25% of the ownership of the company. An individual has “substantial control” if they are a senior officer (ex. CEO, COO, CFO), can appoint or remove senior officers or a majority of directors, or are otherwise an important decision-maker for the reporting company. An individual may exercise indirect control or ownership through board representation, as a trustee, as a beneficiary of a trust, or through control of intermediary entities that separately or collectively exercise substantial control. For example, if Alex owns 75% of ABC LLC, which owns 50% of XYZ LLC, then Alex is a beneficial owner of XYZ LLC by owning 37.5% of XYZ LLC (75% of 50% = 37.5%). You will list all beneficial owners – there is no maximum number.

Company Applicant

A company applicant is an individual who directly files the document that creates or registers the company or is primarily responsible for directing or controlling the filing. If a third party, such as a law firm, files the formation documents, then the lawyer or paralegal is a company applicant, as well as the person directing them to do so. Company applicant information is only required for reporting companies created or registered on or after January 1, 2024, and you will list a maximum of two company applicants.

What are the penalties if I don’t file? Willful violations of the reporting requirements may result in civil penalties up to $500 per day (adjusted annually for inflation, currently up to $591). Additionally, willful violators may be subject to criminal penalties of up to two years of imprisonment and a fine of up to $10,000.

Thanks for the summary. Where can I find more details?

You can find FinCEN FAQs at this website: https://www.fincen.gov/boi-faqs.

Please reach out to Jason Schneider for more information about BOI reporting requirements and any other corporate law issues at (919) 324-3600 or jschneider@schneiderlawgroup.com.

Schneider Law Group is a boutique business law firm in Raleigh, NC, focused on general corporate law, mergers and acquisitions, securities law, and tax strategy for growth-oriented businesses.