Effective January 1, 2024, most new and existing corporate entities in the United States will be required to file beneficial ownership reports with the federal government. These sweeping requirements are part of the Corporate Transparency Act (CTA), which was enacted on January 1, 2021. On September 29, 2022, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued its Final Rule implementing the CTA’s requirements to report
beneficial ownership information (the “Rule”). The Rule takes effect on January 1, 2024. Any reporting company existing or registered before January 1, 2024, must file its initial report with FinCEN by January 1, 2025. Any reporting company created or registered after January 1, 2024, must file its initial report within 30 calendar days after creation or registration.
 
Under the Rule, a wide range of companies are required to report the information of their beneficial owners. Such companies include (i) domestic corporations, LLCs, or any other entity created by filing a document with a secretary of state or similar state or tribal office, and (ii) non-U.S. corporations, LLCs and other similar entities that are registered to do business in the United States, subject to certain exemptions. As provided by the Rule, beneficial owners are “any
individual who, directly or indirectly, either exercises substantial control over such reporting company or owns or controls at least 25 percent of the ownership interests of such report company.”

Violations of the CTA, including failing to report beneficial owner or reporting false or fraudulent information, can lead to civil or criminal penalties. Civil penalties can be up to $500 for each day the violation continues. Criminal penalties include fines up to $10,000 and/or imprisonment for up to two years.

FinCEN is currently building a new IT system called the Beneficial Ownership Secure System to collect and store CTA reports. This system is not yet available and is expected to be operational prior to January 1, 2024.