Corporate Transparency Act: Steps to Meet Year-End BOIR Obligations Under the Corporate Transparency Act
By: Coleman Jackson, Attorney
Date: August 8, 2024
Existing companies that have not yet filed their BOIR (Beneficial Ownership Information Report) with the Financial Crimes Enforcement Network (FinCEN) should take the following steps as soon as possible to prepare to comply with their obligations under the Corporate Transparency Act of 2021 by January 1, 2025. It is now August 8, 2024 and the Corporate Transparency Act is being enforced. Responsible entities must take steps to comply:
Step One. Locate and examine their organizational structuring documents to determine whether any exemptions apply or whether the CTA applies to their organization. This, only, could present challenging and complex legal questions; particular, for industries where teaming agreements, joint ventures, partnerships, trust and other complex business arrangements are at play.
Step Two. Locate and examine their organization’s ownership structure and those in substantial control of their organizations. Ownership percentages records will have to be examined not merely business organizational documents. As for substantial control, this is a complex legal term used by the statute establishing the BOIR obligations for most small and medium sized business entities in the United States. Board minutes must be reviewed. Remember each beneficial owner will have to file with FinCEN and obtaining FinCEN identification can be complex, especially, in complex legal structures. Even determining who or what entity must file the BOIR can be challenging and present ambiguities; although, actual filing a BOIR with FinCEN is not that complicated. Legal questions abound and those filing BOIRs must certify under the penalty of perjury that the BOIR is accurate and complete. It is a crime to aid and abet someone to file an inaccurate and/or false BOIR with FinCEN.
Step Three: Identify everyone within the organization who must file an BOIR and obtain all of the required beneficial owner information. Some preplanning may be required here. Organizational charts, personnel records, job roles and responsibilities all need to be reviewed and examined. In ambiguous situations, organizational charts, roles and responsibilities may need to be defined or redefined. All of this could require time and be time consuming and expensive. These challenges are even more reason why impacted entities with BOIR obligations cannot procrastinate and wait until the last minute to comply with the BOIR obligations. Remember impacted small and medium sized businesses established under state law structuring laws must file their initial BOIR with FinCEN by January 1, 2025.
Step Four: Perhaps Step Four should be Step One. Potential entities must consult with legal counsel to ascertain how the Corporate Transparency Act of 2021 impacts their business. This is a legal question and only lawyers are licensed to practice law in the United States. There is serious potential legal exposure for failing to timely comply with the CTA and/or getting it wrong.
Finally, the Corporate Transparency Act of 2021 is a federal law designed to ferret out money laundering, terrorist financing, tax fraud and other illicit financial crimes by use of entity structures. Some states are considering CTA like transparency laws, while yet other states have already passed similar transparency laws. For example, New York recently enacted the New York Transparency Act which becomes enforceable sometime in 2026 for impacted businesses licensed to do business in New York. Again your state may be considering similar laws cloned after the federal Corporate Transparency Act of 2021 Businesses must keep up to date on State Transparency laws where they do business.
In Summary: Sun light is good for the world economy and hardworking American workers who play by the rules should expect the rule of law to apply to everyone equally whether they are individuals or legal fictions or entities created under the law. Corporate America must be required to act transparent in all of their dealings and relationships.
This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader. You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.
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