Impending Federal Deadline

??????????? The Corporate Transparency Act (the “Act”) became effective on January 1, 2024 and aims to limit and prevent financial crimes and the use of shell companies. The Act requires certain companies to report beneficial owner information to the Financial Crimes Enforcement Network (“FinCen”). Reported information is not publicly available but is available to governmental agencies.

Reporting Obligations

??????????? Reporting Companies (as defined below) formed prior to January 1, 2024, are required to file a Beneficial Owner Report (“BOI Report”) with FinCen by January 1, 2025. Reporting Companies formed on or after January 1, 2024, and before January 1, 2025, are required to file a BOI Report with FinCen within ninety (90) days of their date of formation. Reporting Companies formed January 1, 2025, and thereafter must file a BOI Report within thirty (30) days of their date of formation. In addition to filing the initial BOI Report, Reporting Companies and Beneficial Owners (as defined below) must ensure the BOI Reports remain complete and accurate. In the event there are any changes to the reported information, updated BOI Reports must be submitted within thirty (30) days of the change. Changes that require updated BOI Reports include, without limitation, the addition of a new Beneficial Owner or changes to a Beneficial Owner’s name or address.

??????????? The Act requires Reporting Companies to disclose information about the Reporting Company itself and its Beneficial Owners. Information about the Reporting Company includes its address and jurisdiction of formation. Information about the Beneficial Owners includes dates of birth, addresses, and copies of non-expired licenses or passports. Information about individuals involved in the formation of the Reporting Company such as the individual who filed the formation documents with the secretary of state (“Company Applicants”) may also need to be disclosed.

Reporting Entities and Beneficial Owners

??????????? “Reporting Companies” are entities registered to do business in the United States through the filing of a document with a secretary of state or a similar office including foreign corporations and limited liability companies that are registered to do business in the Unites States. “Beneficial Owners” are all individuals who hold at least twenty-five percent (25%) indirect or direct ownership in a Reporting Company and all individuals who exercise substantial control over a Reporting Company. Individuals who exercise substantial control include those who (i) are senior officers, (ii) have authority to appoint or remove a senior officer or a majority of the board of directors, (iii) are important decision-makers, or (iv) have another form of substantial control over the Reporting Company.

??????????? Currently, there are 23 exemptions to the reporting obligations: securities reporting issues; governmental authorities; banks; credit unions; depository institutions holding company; money services businesses; brokers or dealers in securities; securities exchange or clearing agencies; other Exchange Act registered entities; investment companies or investment advisers; venture capital fund advisors; insurance companies; state-licensed insurance producers; Commodity Exchange Act registered entities; accounting firms; public utilities; financial market utilities; pooled investment vehicles; tax-exempt entities; entities assisting a tax-exempt entities; large operating companies*; subsidiaries of certain exempt entities; and inactive entities.

??????????? With the January 1, 2025 deadline rapidly approaching, businesses should determine their reporting obligations and ensure they comply and remain in compliance with the Act. Willfully failing to comply or willfully avoiding compliance may result in civil penalties up to five hundred dollars ($500) a day for each day the violation continues or criminal penalties of imprisonment of up to two (2) years and/or a fine of up to ten thousand dollars ($10,000).?

If you have questions or concerns regarding the Act, please reach out to your primary contact at Gray Ice Higdon or a member of our CTA Group: Casner Wheelock, Sam Wright, Anna Deye, and Janis Howard.

Disclaimer: This summary is current as of September 2, 2024. It does not contain all aspects of the Act and is subject to change as more information is released. The information contained in this communication is not legal advice and was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Corporate Transparency Act or (ii) determining a specific entity’s obligations under the Corporate Transparency Act.?

*To qualify for this exemption, entities must have more than twenty (20) full time employees in the United States, a physical office within the United States; and filed an income tax return for the previous year evidencing more than $5,000,000 in gross receipts or sales on its IRS form after taking out any gross receipts or sales from outside the United States.