As the fourth quarter approaches, entities should be aware of their Corporate Transparency Act (CTA) compliance obligations. A company is considered a “reporting company” under the CTA if it is formed by making a filing with a state secretary of state or, in the case of a non-US company, if it is registered to do business in the United States, unless one or more of 23 exemptions applies.

If your company is considered a reporting company and it was formed before January 1, 2024, your initial report must be filed with the Financial Crimes Enforcement Network (FinCEN) by January 1, 2025. Reporting companies formed on or after January 1, 2024, have either 90 days (if formed in 2024) or 30 days (if formed in 2025 or later) to file their initial reports.

For detailed overviews of the CTA, please visit our prior alerts. We have outlined the CTA’s final rules and regulations, discussed the reporting requirements for non-US companies, and provided guidance on reporting beneficial ownership information (BOI) during an ownership dispute.

Under the CTA, reporting companies must submit company and BOI to FinCEN, a bureau within the US Department of Treasury. The CTA defines a “beneficial owner” as an individual who either exercises substantial control over the company or owns or controls at least 25% of the company’s ownership interests, directly or indirectly.

Alongside BOI and company information, companies formed on or after January 1, 2024, must also provide information regarding their “company applicants” — the individual who filed the formation or registration documents with the state and, if different, the individual who is primarily responsible for directing or controlling the filing. More information about company applicants can be found in our previous alert, available here.

Reporting companies also have ongoing reporting requirements. If the information provided to FinCEN in its initial report changes, the company must file an updated report within 30 days of any such change. The company must also file a corrected report if it discovers an inaccuracy in a prior report within 30 days after becoming aware or having reason to know of that inaccuracy.

Consequences of Failing to Report

Any company that willfully fails to comply with CTA reporting requirements may be subject to penalties, including a $500 civil penalty for each day the violation continues, as well as criminal penalties of up to two years’ imprisonment and a fine of up to $10,000. Individuals also may be subject to penalties if they cause a company to fail to comply with the CTA, whether directly or by refusing to provide required information to the company, or if they are a senior officer at the company at the time of the failure. As such, it is imperative to ensure that each reporting company is ready to comply before the due date for its initial report under the CTA.