Blog Series: Reporting Obligations

On January 1, 2024, the Corporate Transparency Act will require millions of U.S. companies to file first-time beneficial ownership information reports with the U.S. Department of Treasury Financial Crimes Enforcement Network. For the next several weeks, Dickinson Law will cover some of the most significant reporting obligations as well as what businesses, financial institutions, and existing entities need to know about the changes.

We recently began a series on the Corporate Transparency Act and what it means for small businesses. Our first article summarized which companies may be subject to the new reporting requirements, as well as the information required to be reported. If you think your small business may be subject to the new requirements we described in that first article, you may now be wondering about some of the more technical aspects of compliance – who submits the reports, and to whom are they submitted? How often do reports need to be submitted?

As discussed in our first article, reporting companies are required to submit beneficial ownership information (“BOI”) reports beginning on January 1, 2024. Besides information about a company itself, information about a company’s beneficial owner(s) and its company applicant(s) must be included in the BOIs. However, only the reporting company itself must submit a BOI; the individuals whose information is included are not required to submit any BOIs. BOI reports must be filed electronically using FinCEN’s secure filing system. FinCEN will begin accepting reports January 1, 2024. No reports will be accepted early.

New reporting entities formed after January 1, 2024 will be required to file an initial BOI within 90 calendar days of their formation. Entities that were in existence prior to January 1, 2024 will be required to file an initial BOI by January 1, 2025. Should there be a change in the beneficial owners initially reported, reporting entities will have 90 calendar days from receiving notice of the change(s) to submit a new BOI identifying those changes.

A reporting company is considered to have received notice if it receives either actual or public notice. While public notices may seem ambiguous, the definition does include when a change is reflected on a state’s publicly accessible registry maintained by the Secretary of State.

Companies that were previously exempt from the CTA’s reporting requirements, but that later lose their exempt status, must file a BOI within 90 days of losing exempt status. In some cases, beneficial owner information may be reported for the parent of a minor child who is the actual beneficial owner of the reporting entity. In those cases, similar to when a company loses its exempt status, if a beneficial owner who was a minor child reaches the age of majority, the reporting company must file an updated BOI report identifying that individual as a beneficial owner.

Not only do changes in the identity of beneficial owners require a new BOI filing, but changes in the information required about beneficial owners requires new BOI reports. For example, a reporting company will be required to file updated BOI reports for changes in a beneficial owner’s address or name.

If a reporting company’s initial BOI is accurate, the initially reported company applicants should not need to be changed. However, if the initial report identifies inaccurate company applicants, the reporting company must correct the inaccurate information. There are no penalties for unknowingly filing an inaccurate BOI report, so long as the inaccuracies are corrected within 90 calendar days of when the inaccurate report was filed.

A reporting company that was not exempt but that subsequently becomes exempt will be required to file an updated BOI report indicating this change within 90 calendar days. This report differs from other BOI reports, however, because it will only requires that the reporting company identify itself and indicate its new exempt status. Surprisingly, a new BOI is not required when a reporting company terminates or dissolves.

It’s easy to understand how so many new requirements may cause some small businesses apprehension about ongoing compliance. Unfortunately, understanding when a new BOI report is required, as well as the deadlines for submitting a required BOI report, will be essential for small businesses being compliant and avoiding the penalties of noncompliance.