The Corporate Transparency Act (CTA) filing requirements have been reinstated, extending the deadline for most reporting companies to file Beneficial Owner Information (BOI) with the Financial Crimes Enforcement Network (FinCEN) from December 31, 2024, to January 13, 2025, Forbes reports.
Entities classified as “reporting companies” must ensure compliance to avoid severe penalties, which include fines of up to $600 per day and potential jail time.
The CTA aims to increase transparency and combat financial crime by requiring closely held business entities, such as limited partnerships (LPs), limited liability companies (LLCs), and S corporations, to report information about their beneficial owners.
Beneficial Owners (BOs) include individuals who:
- Own at least 25% of a reporting company, or
- Exercise “substantial control” over the entity.
However, the definition of “substantial control” is vague, potentially encompassing officers, directors, and key employees. For entities owned or controlled by trusts, the filing requirements become more complex, often involving fiduciaries and other related individuals.
Recent court cases have challenged the CTA’s constitutionality. However, on December 23, 2024, the US Court of Appeals for the Fifth Circuit reinstated the filing requirements, rejecting a preliminary injunction. FinCEN subsequently announced an extension to the filing deadline for most entities, providing a small window for compliance.
FinCEN mandates different filing deadlines depending on when the reporting company was created or registered:
- Prior to January 1, 2024: File BOI by January 13, 2025.
- Between December 3, 2024, and December 23, 2024: File within 21 days of the original deadline.
- Starting January 1, 2025: New reporting companies must file within 30 days of formation or registration.
Exceptions apply to entities involved in specific lawsuits or qualifying for disaster relief.
Critics argue the CTA imposes an undue burden on small businesses and individuals. The following issues have been raised:
- Complex filing rules, especially for entities owned by trusts or inactive entities.
- Ambiguities around the definition of “substantial control.”
- Limited support from FinCEN’s website, including unclear error messages and insufficient online guidance.
- Lack of user-friendly features, such as integration with existing tax filing systems.
Many have suggested reforms to simplify the process and provide exceptions for good-faith efforts to comply, particularly for entities struggling to locate or obtain information from beneficial owners.
To streamline the filing process, entities should:
- Organize Necessary Information
- Collect legal formation documents, tax identification numbers, and addresses for reporting companies.
- Obtain BOI, including full legal names, Social Security Numbers, and identification documents for each beneficial owner.
- Set Up FinCEN Accounts
- Beneficial owners can obtain a FinCEN Identifier Number to simplify future filings and reduce data handling risks for reporting companies.
- Prepare Filing Templates
- Create templates to track entity and BOI data for quick reference during the filing process.
- Complete Filings Methodically
- Save all confirmations and receipts securely. Label files clearly to avoid confusion about which entity they pertain to.
- Consult Professionals if Needed
- Given the complexity of the requirements, seeking assistance from legal or tax professionals familiar with the CTA may save time and prevent errors.
The reinstated CTA filing requirements highlight the importance of compliance by the January 13, 2025, deadline.
