As a courtesy to our clients, referral sources and friends of the firm, this article provides information about potential reporting obligations under the Corporate Transparency Act (CTA) and links for guidance on completing and filing reports.
On December 24, 2024, our office reported that the Fifth Circuit Court of Appeals issued a stay of the nationwide preliminary injunction on December 23, 2024, which meant that the reporting obligations under the Corporate Transparency Act (“CTA”) were once again enforceable, but under extended deadlines.
On December 26, 2024, the United States Court of Appeals for the Fifth Circuit vacated the stay of the preliminary injunction and once again enjoined enforcement of the reporting rule and the CTA “in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments.”
As a result of this latest decision, reporting companies do not, at this time, have a legal obligation to submit beneficial ownership reports.
Due to the continuing uncertainty around the enforcement of the CTA, reporting companies that have not yet filed beneficial ownership reports should be prepared to file on short notice if the preliminary injunction is once again stayed or overturned since a new filing deadline could be imposed on short notice.
What is the Corporate Transparency Act?
The CTA is a federal law aimed at increasing corporate transparency to combat financial crimes and terrorism. The CTA requires certain entities to file a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN). These reports disclose identifying information about individuals who own or control certain entities. Compliance is critical, as failure to file or update BOI reports can result in significant monetary and criminal penalties.
Henson Efron will not be filing BOI reports on behalf of our clients or others. However, we are available for consultations if you have questions regarding compliance with the CTA.
Who must report?
Any entity that files formation documents with a U.S. state or territory (e.g., corporations, LLCs, limited partnerships) formed prior to January 1, 2024, must file a BOI report with FinCEN, unless an exemption applies.
- Entities formed between January 1, 2024, and December 31, 2024, have 90 days from formation to file their BOI reports.
- Entities formed after January 1, 2025, must file their BOI reports within 30 days of formation.
- Entities must also file amended reports within 30 days of any changes in information regarding the entity or its Beneficial Owners, such as changes in ownership or senior executives.
In general, your entity must report if it has fewer than 20 full time employees and less than $5 million in gross receipts or sales as reflected on your last filed federal income tax or information return (e.g., IRS Form 1120, consolidated IRS Form 1120, IRS Form 1120-S, IRS Form 1065, or other applicable IRS forms).
Who is exempt from reporting?
The complete list of exempt entities is available here or in the Small Entity Compliance Guide. Notable exemptions include:
- Tax-exempt entities under 501(c) of the Internal Revenue Code.
- Entities with more than 20 employees and more than $5 million in gross receipts or sales.
- Entities formed before January 1, 2020, that are inactive, have not received or sent more than $1,000 in funds in the last year, and do not own any assets.
What must be reported?
Entities must report information regarding their Beneficial Owners, which includes individuals who:
- Directly or indirectly exercise substantial control over the entity, regardless of ownership, or
- Own or control 25% or more (individually, or through another entity or trust) of the ownership interests of an entity.
Substantial Control includes senior officers (e.g., President, CEO, CFO), individuals with authority to appoint or remove officers/directors, or others with significant decision-making power.
Ownership Interests encompasses equity, warrants, stock, capital and profit interests, convertible instruments, voting rights, some put and call options, and similar holdings.
The identifying information required for Beneficial Owners include:
- Full legal name,
- Date of birth,
- Residential or business address, and
- A unique identifying number from an acceptable ID (e.g., passport, driver’s license) with a photo of the document, OR a FinCEN identifier obtained here.
BOI information must be updated within 30 days of any changes to previously submitted information.
How do you report?
Reports must be filed with FinCEN via the BOI Filing System (https://boiefiling.fincen.gov/). Filings may be completed online or by submitting a PDF. Once filed, FinCEN will provide a confirmation.
What are the consequences of non-compliance?
Failure to comply with the CTA can result in criminal and/or civil liability for an entity and its senior officers. Non-compliance penalties can be found here and include:
- Fines of up to $500 per day for continued non-compliance (adjusted for inflation).
- Criminal penalties for submitting false information or failing to update BOI information.
Further Resources
While this email provides a summary, it does not include all the details regarding your reporting obligations. For further guidance, the following links may help you file your BOI report:
If you have any questions about these requirements or would like to discuss how they may apply to you or your organization, please feel free to contact us to schedule a consultation.
The purpose of this article is merely to provide general information and should not be construed as legal advice.
