The Corporate Transparency Act (CTA), designed to prevent money laundering and promote a Know Your Customer policy, goes into effect on January 1, 2024. As outlined in our February 2023 advisory, the Act will require a broad range of entities to report information about their beneficial owners’ interest (BOI) to a bureau of the U.S. Department of Treasury, FinCEN.  

If the entity does not fall into one of twenty-three categories of entities exempt from reporting (including public companies, banks, utilities, tax-exempt entities, large operating companies, and inactive entities), it will be required to report the BOI information to FinCEN.

For entities required to report BOI information to FinCEN:

• Entities formed or registered prior to January 1, 2024, must file their BOI reports by January 1, 2025. 
• Entities formed or registered on or after January 1, 2024, will have 90 days from their date of formation or registration to file the applicable BOI reports.

FinCEN’s small entity compliance guide and BOI FAQs are excellent resources for determining whether and how the CTA applies to your company. We also recommend that you review our August advisory for a detailed case study outlining the steps an entity would have to take to comply with the CTA in the estate planning context. 

Five Key Considerations Before December 31, 2023 

1. Consider dissolving unnecessary existing entities before January 1, 2024. Companies dissolved before the CTA’s effective date will not be required to report BOI information. However, any entity dissolved on or after the CTA’s effective date must report BOI information. We recommend speaking with your attorney and tax advisor before proceeding with any dissolution. 
    
2. Consider forming new entities in December 2023 that are expected to be needed in 2024 if they will likely be subject to the CTA reporting requirements. Companies formed before January 1, 2024, that are not exempt from the CTA reporting requirements will have until January 1, 2025, to file the applicable BOI reports.  Companies formed in 2024 will have only 90 days from the date of formation to file the applicable BOI reports. Initial equity ownership, Board members, and Senior Officers of the new entity should be identified before forming any entities, given the reporting deadlines under the CTA.
    
3. Consider modifications to form documents and internal processes to facilitate CTA compliance. For example, 
   1. (i) include CTA information reporting obligations in LLC Agreements, Stockholders Agreements, and other corporate governance documents; 
   2. (ii) consider adding a contractual requirement in employment agreements to require Senior Officers to report their relevant BOI information to the reporting company; 
   3. (iii) establish a process for gathering BOI information for your reporting entities and for identifying those individuals and entities to be contacted to provide that information;
   4. (iv) and establish internal procedures to track changes in BOI information that may trigger a BOI update filing, which must be filed within 30 days of the change. 
       
4. Decide who in your organization will serve as the Company Applicant listed on filings for new entities subject to the CTA. For example, consider the in-house counsel in charge of corporate formations.
    
5. Consider creating a login.gov account to obtain a FinCEN identifier. In certain circumstances, an individual may submit a FinCEN identifier instead of the required BOI information. Using a FinCEN identifier will allow an individual to comply with CTA requirements without separately disclosing personal information to the reporting company.  However, FinCEN identifiers can only be obtained by individuals who have a login.gov account.

Be advised that there may be delays around year-end at the Delaware Division of Corporations and other state agencies that handle formation and registration filings. 

Please contact your usual G&S attorney to determine if these requirements apply to you or your company as a beneficial owner or reporting company.