Since the Corporate Transparency Act was officially enacted, legal experts and compliance officers have spent hours and hours combing through the legislation.

At the heart of the CTA’s mandate, federal legislators require all qualifying business entities to submit diligent beneficial ownership information (BOI) reports to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). The purpose of the legislation is part of a broader effort to crack down on white-collar crime and promote greater corporate transparency.

Common FAQs About the CTA

While the enactment of the legislation was highly anticipated, many lingering questions about the reporting requirements confused business leaders. Therefore, FinCEN created a detailed FAQ page that guides legal professionals, in-house counsel, and compliance officers on how to prepare their respective BOI reports.

The most common FAQs relate to the legislation’s filing deadlines. FinCEN requires that any business entity created on or after January 1, 2024 must submit transparent BOI reports no later than 90 days following the receipt of the articles of incorporation. Some exceptions can be made but, generally speaking, most new entities must follow these requirements.

Businesses that were operational before January 1, 2024 are not required to submit their BOI reports until January 1, 2025. Regulators recognize that established corporations have multiple entities and subsidiaries operating under their corporate umbrella. As a result, gathering and documenting all BOI reporting data is a larger undertaking in these businesses.

Updated FinCEN FAQs on the CTA

Despite the detailed FAQ page, a significant amount of confusion remains regarding the status of the CTA. A lawsuit brought before federal court in Alabama, in which a federal judge ruled the CTA “unconstitutional” — a ruling currently under appeal — further compounded the confusing status of the legislation.

To help address ongoing questions about the CTA, FinCEN added new information to their FAQ page. These are a handful of the concerns addressed by FinCEN’s latest content update.

Reporting obligations for previously exempt entities

When the CTA was first enacted, some businesses in various industries were exempt from the BOI reporting requirements. Common exempt industries included sectors you would expect, such as:

• Government authorities
• Financial institutions
• Securities exchanges
• Venture capital funds
• Public utility companies
• Financial market utilities
• And more

In some cases, those exemptions have been challenged and previously exempt entities have lost their exemption status. In these situations, FinCEN requires these businesses to file their BOI reports by the end of 2024, based on specific conditions. General counsel or law firms representing these businesses can contact FinCEN to discuss these reporting conditions.

Businesses that received their articles of incorporation after January 1, 2024 that have lost their exemption status must act more quickly. These entities are required to submit BOI reports within 30 days upon losing their exemption status.

Guidance for S-Corporation compliance

S-Corporations have different business structures than the more common C-Corporations. However, under the CTA, S-Corporations have the same BOI reporting requirements as C-Corporations that must be filed with FinCEN.

Some exemptions do exist, though they’re primarily awarded to S-Corporations that have a significant presence in the United States, as well as those that meet certain financial thresholds. FinCEN advises legal and compliance officers of S-Corporations to contact the Department of Treasury for any questions about exemption statuses.

Homeowners Associations compliance clarification

Homeowners Associations make and enforce rules or by-laws regarding properties within their jurisdiction. Individuals who serve on the board of directors for Homeowners Associations may be classified as beneficial owners, requiring the organization to submit BOI reports to FinCEN.

Beneficial ownership through trusts

Individuals with significant control over trusts are, in most cases, exempt from BOI reporting requirements under the CTA. The exception to that rule lies in cases where those individuals maintain or control at least 25% controlling interest — the threshold requirement that classifies an individual as a beneficial owner — in another business entity through the trust.

Additionally, if the beneficial owner has access to a significant portion of the trust’s assets, they may be required to submit BOI reports documenting those instances. A detailed review of individual trusts must be conducted by FinCEN to determine if trustees qualify as beneficial owners, whose information must be disclosed to the authorities. FinCEN encourages any legal experts managing trusts to contact their department for additional clarity.

How to easily prepare BOI reporting data for FinCEN

FinCEN continues to update their FAQs with more content as new legal matters are addressed. Each individual entity should prepare to submit detailed BOI reports to FinCEN if that data is indeed required. Failure to comply with the reporting requirements will result in stiff financial penalties for the business and possible criminal charges against shareholders and stakeholders.

Newly formed and long-established businesses can simplify their reporting workflows using intuitive entity management software. These platforms provide easy-to-use templates so you can build structured organizational charts, cap tables, and shareholder ledgers in one centralized database.

The benefit of using entity management software for all beneficial ownership, stakeholder, and shareholder data is that the platform functions as a single source of truth. If there are any discrepancies in the BOI reports, compliance officers can simply refer to the platform for clarification. Once the data has been corresponded, make the appropriate updates to the BOI reports and submit them to FinCEN.

By storing all beneficial ownership, stakeholder, and shareholder data in a centralized entity management platform, most of the tediousness of generating those BOI reports is already complete. The data exists in structured minute book records within the platform. All your legal team has to do is pull out the appropriate records and generate PDF files to submit as your BOI reports. It’s a quick, easy, and painless workflow.

Ready to get out ahead of your entity’s BOI reporting requirements? Join the MinuteBox revolution today and build template organizational charts, cap tables, shareholder ledgers, and all entity management records all within one cloud-based secure platform.