What is the Corporate Transparency Act?

The Corporate Transparency Act (CTA) is a U.S. law that requires most small entities to disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the Department of the Treasury. Its purpose is to increase transparency in corporate structures, to prevent individuals from hiding behind anonymous entities, and to combat illicit activities, such as money laundering, terrorism financing, and tax evasion.

Why might I need to file with FinCen?

Under the CTA, most entities formed under state law (corporations, limited partnerships, limited liability companies, etc.) and in existence on January 1, 2024 must file an initial Beneficial Ownership Information (BOI) Report with FinCEN on or before January 1, 2025. Entities created during 2024 have a 90-day period to file its initial BOI report with FinCEN. Entities formed in 2025 and beyond will have 30 days to file. (Note: The FinCEN filing time begins on the day when the entity was formed and the organizational documents were filed with the Secretary of State where the entity was created.)

Who is responsible for filing the BOI Report?

The entity is required to file the BOI Report with FinCEN and has an ongoing obligation to monitor and keep the reported information current. This role is typically handled by a designated officer, director, or manager of the company, which could possibly be you. After an entity files its initial BOI Report, subsequent filings are necessary only if reported information changes or if there are changes in entity ownership or control. Updated BOI Reports must be submitted to FinCEN within 30 days of the information change, not 30 days of the entity becoming aware of the information change.

If you are a beneficial owner, it is also your responsibility to alert the entity within this same 30-day timeframe when new information, such as a change of address, requires the filing of an updated BOI Report. Or, if you have a unique identifying number (FinCEN Identifier), you update your changes directly with FinCEN, rather than the entities.

What information does the CTA require?

The CTA stipulates that the entity collect, report, and monitor certain identifying information about the entity, the beneficial owners that hold an interest of 25% or more in the entity, and the owners or non-owners that control or influence the entity’s operations, finances, and structures. For entities created on or after January 1, 2024, the entity must also report identifying information about the individuals involved in the creation of the entity with the applicable Secretary of State’s office, including any third parties (e.g., attorneys) that assist in an entity’s formation. While the CTA contains nuanced rules regarding who may be considered an owner or an individual with substantial control or influence, the information that the entity must collect, report, and monitor is straightforward.

FinCEN has established a website (https://boiefiling.fincen.gov) where an entity can submit BOI Reports and necessary documentation free of charge. In addition, several third-party service providers (including accounting and law firms) offer filing and monitoring services of varying degrees for a fee.

Are there penalties for not filing on time?

The CTA provides somewhat harsh civil and/or criminal penalties ($500/per day; $10,000 max; imprisonment up to two years) for deliberately failing to file initial or updated BOI Reports. While aimed at entities involved in illegal activities, the scope of these penalties is—unfortunately—broader and may be assessed against the entity, entity management, owners, those with substantial control over the entity, and third parties that assist with CTA compliance, depending on the circumstances. Therefore, it’s imperative that entities make a good faith effort to collect, report, and monitor information that must be submitted to FinCEN.

Next steps

Fall is an opportune time to become acquainted with the CTA’s new reporting requirements. According to FinCEN, many—if not most—entities can satisfy their CTA compliance obligations, without the assistance of third-party professionals, using guidance that FinCEN has issued (https://fincen.gov/boi).

For more complex situations, The Family Office at Synovus recommends connecting with legal counsel regarding CTA-related questions and potential revisions to entity governing documents.

The Family Office at Synovus is not a law firm, does not practice law, and does not perform legal services such as assisting with the formation or registration of legal entities. As such, we do not prepare or electronically submit BOI Reports or consult on technical questions related to the BOI reporting requirements.

The Family Office at Synovus is a division of Synovus Trust Company, N.A. Trust services for Synovus are provided by Synovus Trust Company, N.A. Investment products and services are not FDIC insured, are not deposits of or other obligations of Synovus Bank, are not guaranteed by Synovus Bank, and involve investment risk, including possible loss of principal invested.