By: Attorney Thomas A. Griesbach and Attorney Samuel J. Spurney

The Corporate Transparency Act became law on January 1, 2022 and implements Beneficial Ownership Information (“B.O.I.”) reporting requirements on most small businesses in the United States.  The Act will create a national database available to law enforcement to crack down on money laundering through “shell corporations”.  The reporting requirements will not come into effect until the Treasury issues final regulations on the matter, but all business owners should be ready.

The Financial Crimes Enforcement Network (“FinCEN”), a bureau of the United States Department of the Treasury, issued a notice of proposed rulemaking in December 2021 that proposed some specific rules for the B.O.I. reporting.  The public comment period on this proposed rulemaking closed in February 2022.  FinCEN anticipates issuing two more notices of proposed rulemaking before issuing final regulations, with one round expected to occur before year’s end.  So, the implementation of the reporting requirements will not be immediate, but it is coming.

Following are some important takeaways from the Act and proposed rulemaking to date:

  • Reporting Companies existing as of the effective date of the final regs will have 1 year from the effective date to file its first B.O.I. report. Reporting Companies formed after the effective date of the final regs will have 14 days to file a report. Updates to any report will be due in 30 days.
  • Not all entities will be Reporting Companies. A Reporting Company is generally any entity formed by filing a document with a secretary of state, such as a corporation, limited liability company, or limited liability partnership.  However, there are numerous exceptions, generally entities that are already subject to increased filing requirements and government oversight such as charities, large corporations, banks, etc.  Trusts appear not to be Reporting Companies, but FinCEN anticipates asking for public comment on this point.
  • A B.O.I. report is expected to require disclosure of all Beneficial Owners and the Applicants/Organizers of the Reporting Company. A Beneficial Owner will be anyone who (1) “exercises substantial control over a reporting company”, or (2) “owns or controls at least 25 percent of the ownership interests of a reporting company”.  The final regs will set forth numerous activities that could constitute “substantial control over a reporting company”, but will concentrate on individuals able to make significant decisions on behalf of the company.
  • Noncompliance may carry civil penalties of up to $500 per day of noncompliance and/or criminal penalties.

This blog post is provided for informational purposes only and by its very nature is general.  Final regulations are yet to be released and may differ from the proposed rules issued to date.  This information is not intended as legal advice and should not be relied upon.

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