On January 1, 2024, the federal Corporate Transparency Act (CTA) took effect, mandating that “reporting companies” register with, and provide certain information to, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).  We discussed the CTA in detail in our electronic update in December 2023 (which can be found on our website under News & Resources), but we wanted to include an update and a reminder. 

The CTA applies to all entities that are created by filing documents with a secretary of state (or similar office) such as corporations and limited liability companies (even if a single member) unless otherwise exempt. Certain entities, including publicly traded companies and tax-exempt entities, are exempt and not considered reporting companies. While trusts and estates are not reporting companies, if a trust or estate has an interest in a reporting company, then individuals connected with the trust and estate may need to provide information to reporting companies (this is covered in a separate article on our website).

All reporting companies created before 2024 must file their report on or before January 1, 2025. All reporting companies created in 2024 must file their report within 90 days of creation, and all companies created in 2025 and after must file their report within 30 days after creation. Any amendments, updates, or corrections to reports must be submitted within 30 days of the change. There are penalties imposed for willful failure to comply. You may learn more about filing requirements and file reports directly on FinCEN’s website at www.fincen.gov/boi. To assist with CTA compliance, we encourage you to consider using third-party providers that we can recommend.

Recently, a federal court in Alabama ruled that the CTA is unconstitutional, but the ruling is limited to the plaintiffs in that case and has been appealed. In an online notice, FinCEN indicated that it would abide by the court’s ruling in the Alabama case for as long as it is effective but that it would continue to implement and enforce the CTA against all other reporting companies. As such, reporting companies should abide by the CTA filing obligations.

New York recently implemented its own version of the CTA, known as the LLC Transparency Act. New York’s law is broadly patterned after the CTA, but it applies only to limited liability companies formed in, or qualified to do business in, New York. It requires disclosure of information to the state by January 1, 2027 for LLCs formed or qualified before January 1, 2026. LLCs formed or qualified on or after January 1, 2026 will have 30 days to comply. It also requires annual statements confirming or updating information reported. Other states are considering adopting their own version of the CTA. The above referenced federal case has no impact on a state’s version of the CTA. For more information, please contact Mark W. Klein, Lisa F. Metz or another BW attorney.

© 2022 • Brody Wilkinson PC
This website may constitute Attorney Advertising in some jurisdictions | Prior results do not guarantee a similar outcome | Terms & Conditions | Privacy Protection Policy
Photographs by Diana DeLucia