What is the Corporate Transparency Act?

The Corporate Transparency Act (“CTA”) will require most small businesses operating in the United States to report its Beneficial Owners to the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN). Failing to submit the required report comes with significant criminal and civil sanctions (more on that below).

According to the CTA, a “Beneficial Owner” is:

• any individual who, directly or indirectly, exercises substantial control over a Reporting Company; OR
• owns or controls at least 25 percent of the ownership interests of a Reporting Company.

The Reporting Company will have the obligation to provide the following information for all its “Beneficial Owners:”

• Individual Names
• Dates of Birth
• Residential Address
• Non-Expired Passport Number, Government Issued Identification Number or Driver's License Number (also state or jurisdiction that issued either)

In addition, if an entity is created or registered on or after January 1, 2024, the entity must also identify its Applicant(s). An Applicant is:

• The individual who directly files the document that creates or registers the company; and
• If more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing.

Any companies created or registered before January 1, 2024, will not be required to report the Applicant(s).

Are there Any Businesses Exempt from Reporting their Beneficial Owners to FinCEN?

Yes. There are twenty-three (23) exempt businesses, which includes banks, credit unions, insurance companies, accounting firms, large operating companies, tax-exempt entities, and inactive entities. Please note that exempt businesses must meet certain criteria to be considered exempt. As a result, it is recommended you contact your attorney to determine whether your business is exempt from the reporting requirements.

When can a Company Begin Filing its Report?

• Reporting Companies that were created or registered before January 1, 2024, must submit their report between January 1, 2024, and January 1, 2025.
• Reporting Companies that are created or registered on or after January 1, 2024, but before January 1, 2025, have ninety (90) calendar days after receiving notice of the company's creation or registration to file its report.
• Reporting Companies created or registered on or after January 1, 2025, will have thirty (30) calendar days after receiving notice of the company's creation or registration to file its report.

Do I need to Update my Report if something Changes?

Yes. If there is any change to the information provided in your report, the Company has thirty (30) calendar days after the change occurs to report the change to FinCEN. 

What Happens if a Company fails to Report or Update its Beneficial Owner(s) or Applicant(s)?

According to FinCen, “a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. That person may also be subject to criminal penalties of up to two YEARS' imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.”

. . .

The good news is that there is no annual reporting requirement but as indicated above, the Company has a legal obligation to make updates if any changes are made to the information previously submitted. 

It is recommended that you consult with your attorney before filing the required report. Determining who is an exempt business or who is a Beneficial Owner can be complicated, especially determining “substantial control” over a Reporting Company. Your attorney can file the report on your Company's behalf or your can file the report yourself. If you are interested in learning more about the Beneficial Ownership Reporting Requirements, Click Here. You can also review the Small Entity Compliance Guide for Reporting the Beneficial Ownership created by FinCEN by Clicking Here.

                                                                                                                                                                         . . .

John M. Burke manages the firm's Maine cannabis law practice. Mr. Burke advises and represents the firm's clients throughout Maine in both the Medical and Adult Use cannabis programs in a wide range of Maine cannabis law matters. In addition to Mr. Burke's Maine cannabis law practice, Mr. Burke advises and assists the firm's clients in a variety of industries on various intellectual property matters throughout the United States. Learn more about John Burke by clicking here.

Caseiro Burke is a boutique law firm that specializes in intellectual property law and cannabis compliance and licensing in the State of Maine. We offer clients creative, cost-effective and reliable legal solutions in all intellectual property and Maine cannabis law matters. 

DISCLAIMER: The information above is provided as a brief summary of the Beneficial Ownership Information Reporting Requirements. Please visit FinCEN's website to learn more about the specific reporting requirements. No blogs produced by Caseiro Burke shall be considered legal advice.