New companies formed on or after January 1, 2024 are subject to the federal Corporate Transparency Act (codified as 31 U.S.C. §5336) (“CTA”) which requires information reports to be filed with the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). Under the law, new companies subject to the reporting requirement must file the required report within 30 days after receiving notice of the creation of the company from the Secretary of State. However, FinCEN has announced that because of the new law and reporting obligation, entities formed in 2024 will have 90 calendar days to report (rather than 30). The time period runs from the date the company receives actual notice that its creation is effective, or after a secretary of state first provides public notice of the company’s creation, whichever is earlier. These requirements also apply to foreign companies which are registered for the first time in a state within the United States.
In addition, if any reportable information changes, an updated report must be filed with FinCEN within 30 days of the change or discovery of the change. 31 C.F.R. §1010.380(a). This might include changes to the entity’s business address or the addition of a “trade name,” among other possible changes.
New companies must report three categories of information: (i) entity information, including the entity’s name, business address, Tax identification number, trade name, and state of formation or registration; (ii) “company applicant” information, including the individual’s full legal name, date of birth, home address (or business address if applicable), and identification document and number, such as a driver’s license or passport number; and (iii) “beneficial owner” information, including the individual’s full legal name, date of birth, home address, and identification document and number. Each company applicant and beneficial owner must also upload an acceptable image of the identifying document, which must be current (i.e., non-expired).
Determining who is a “company applicant” or a “beneficial owner” can pose challenges and requires a fact-intensive analysis. In general, a “company applicant” is the person who files the application to form or register the company, and if different, the person who directs the formation or registration of the company. 31 U.S.C. §5336(a)(2). Attorneys, accountants, or other professionals who provide company formation services can qualify as a “company applicant.” A “beneficial owner” can be any number of persons associated with the company based on the ownership, authority, and control each person has over the company. For example, any person who owns 25% or more of the equity, stock, or voting rights of the company is a “beneficial owner,” as well as any person who holds or exercises the authority of a senior officer, such as the President, Chief Financial Officer, General Counsel, Chief Executive Officer, or Chief Operating Officer.
The CTA is complex and some exceptions or limitations apply to entity filing obligations. Given the strict deadlines for newly-formed companies and the variety of state procedures necessary to form new companies, owners and officers should pay careful attention to the CTA’s requirements and deadlines to ensure an accurate and complete Beneficial Owner Information Report is timely filed. Gensburg Calandriello & Kanter, P.C. remains available to assist new entities with all aspects of formation, operation and compliance, and dissolution or termination.
Sandra Mertens
[email protected]