The Financial Crimes Enforcement Network (“FinCEN”) continues to publish further interpretive guidance through their Frequently Asked Questions (“FAQs”) regarding the Beneficial Ownership Information (“BOI”) requirements under the Corporate Transparency Act. There is one FAQ issued on July 8th that may be a bit surprising.
If you have a company that was formed this year and has dissolved, a BOI report must be filed, or you face liability for noncompliance. Legal entities formed after Jan. 1, 2024, and other entities which continued to exist after Jan. 1, 2024, but did not entirely complete the process of formally and irrevocably dissolving before Jan. 1, 2024, MUST file a BOI report. Also, even if a company is formed then wound up its affairs before the 90-day filing timeframe, a BOI is still required.
This latest CTA update is “C. 14”, a FAQ published on July 8th on the FinCEN website.
Keep in mind that reporting companies that ceased to exist as legal entities prior to Jan. 1, 2024, are excluded from these BOI reporting requirements.
As stated in previously published alerts, there are significant civil and criminal penalties, including fines and imprisonment for willful violations, for failure to comply with CTA reporting requirements.
Here is the entirety of the new guidance issued under FAQ “C. 14”:
C. 14. If a reporting company created or registered in 2024 or later winds up its affairs and ceases to exist before its initial BOI report is due to FinCEN, is the company still required to submit that initial report?
Yes. Reporting companies created or registered in 2024 must report their beneficial ownership information to FinCEN within 90 days of receiving actual or public notice of creation or registration. Reporting companies created or registered in 2025 or later must report their beneficial ownership information to FinCEN within 30 days of receiving actual or public notice of creation or registration. These obligations remain applicable to reporting companies that cease to exist as legal entities — meaning wound up their affairs, ceased conducting business, and entirely completed the process of formally and irrevocably dissolving — before their initial beneficial ownership reports are due. If a reporting company files an initial beneficial ownership information report and then ceases to exist, then there is no requirement for the reporting company to file an additional report with FinCEN noting that the company has ceased to exist.
In addition to “C. 14”, both “C. 12” and “C. 13” were also issued on July 8th on the FinCEN FAQ website. “C. 12” reaffirms that BOI reporting requirements apply to companies created or registered before the CTA was enacted (Jan. 1, 2021). “C. 13” reaffirms that companies are not required to file BOI reports if they are exempt or ceased to exist as legal entities before Jan. 1, 2024, meaning that it entirely completed the process of formally and irrevocably dissolving.
“C. 13” also reaffirms that a company that ceased to exist before the beneficial ownership information reporting requirements became effective Jan. 1, 2024, was never subject to the reporting requirements and thus is not required to file a BOI report.
The CTA lists 23 exemptions, such as companies in heavily regulated industries, like federal and state credit unions, certain banks, insurance companies, and nonprofits. Also, large operating companies with at least 20 full-time employees, more than $5 million in gross receipts or sales, and an operating presence at a physical office within the U.S. are exempt.
Since Jan. 1, 2024, millions of companies have been required to file BOI reports with FinCEN. Companies created or registered prior to Jan. 1, 2024, must file a BOI report by January 2025, while companies created or registered after Jan. 1, 2024, must file a BOI report within ninety (90) days of creation or registration. Starting in 2025, all businesses will have thirty (30) days to file their BOI Reports with FinCEN. (Click here for more information on how to file)
BOI Reports include the company’s legal name, any trade name or assumed name (“DBAs”), its address, the jurisdiction in which it was formed or first registered, and its taxpayer identification number. Additionally, the Reporting Company is required to identify beneficial owners. Beneficial owners are individuals who directly or indirectly own 25% or more of the ownership interests in the Reporting Company or exercise substantial control over the company.
FinCEN continues to publish FAQs in response to inquiries relating to the Beneficial Ownership Information Reporting Rule and Beneficial Ownership Information Access and Safeguards Rule. FinCEN has publish its “Small Entity Compliance Guide” which can be helpful for to assist in making reporting determinations.
If your business has not started preparing on how to comply with CTA reporting requirements, the time is now.
It is also advisable to do an audit of your corporate governance practices, record-keeping procedures, and internal controls to ensure compliance. Additionally, businesses may need to allocate resources for collecting and verifying beneficial ownership information.
We will continue to keep you updated on any future guidance issued by FinCEN regarding compliance procedures and deadlines.
Additional Adams and Reese CTA Client Alerts:
- "CTA Update - Where Do We Stand After Alabama District Court Ruling?" Adams and Reese Client Alert, March 2024
- "FinCEN Issues Alert of Scam E-Mail to Fraudulently Solicit BOI Reporting," Adams and Reese Client Alert, November 2023
- "FinCEN Publishes Compliance Guide to Help Small Businesses Understand Corporate Transparency Act," Adams and Reese Client Alert, October 2023
- "FinCEN Publishes Reporting Requirements, Definitions of Corporate Transparency Act," Adams and Reese Client Alert, May 2023