Time is Running Out to Comply by 1/1/2025 with the new US Corporate Transparency Act (CTA) if You Own or Have Substantial Control Over a Pre-2024 Entity

Hope Krebs
Partner, CTA Strategy Team Member, Duane Morris LLP 

Do you own or have substantial control over a U.S. entity that was in existence as of January 1, 2024 (a Pre-2024 Entity)?  If so, that Pre-2024 Entity may have a NEW reporting obligation that is due on or before January 1, 2025 under the U.S. Corporate Transparency Act (CTA).  The CTA is a new U.S. federal law that became effective on January 1, 2024.  Under the CTA, Pre-2024 Entities (and others) are required to file a report of beneficial ownership (BOI report) with the U.S. Department of Treasury Financial Crimes Enforcement Network (FinCEN) unless the entity qualifies for one of 23 limited reporting exemptions under the CTA.  The BOI report discloses not only the identity of all “beneficial owners” of the reporting entity, but also must include personal identifying documentation (generally a driver’s license or passport) for each of those beneficial owners.  For purposes of the BOI report, the term “beneficial owner” includes not only those who own 25% of the reporting entity but also those who have “substantial control” over the entity.  

The due dates for BOI reports vary for different types of entities but for Pre-2024 Entities the BOI report is due on or before January 1, 2025.  Unfortunately, no extensions are available for filing the BOI report and failure to timely file the BOI report with FinCEN (including all of its supporting documentation) can result in the imposition of significant civil and criminal penalties.     

According to FinCEN, less than 5 percent (or 2 million) of the expected 36 million CTA filings in 2024 had been made as of the end of April.  As a result, unless there is definitive judicial or legislative action before year-end that halts the application of the CTA, we anticipate there will be a deluge of CTA filings in the fourth quarter of 2024.  To avoid the anticipated year-end filing crunch for the Pre-2024 Entities and the risk of triggering penalties, stakeholders and their advisers would be well served by commencing CTA compliance now. CTA compliance entails potentially time-consuming critical determinations as to (1) whether an entity qualifies for any of the 23 limited CTA exemptions, and (2) if not, who are all of the beneficial owners of that entity that must be disclosed, collection of requisite supporting documents from all beneficial owners and the preparation of the requisite report.   

In light of the impending due date for filing BOI reports for Pre-2024 Entities, on September 10 at 12 PM EST the Duane Morris CTA Strategy Team (a dedicated team of partners who actively monitor developments regarding the CTA) will be conducting a 1-hour webinar focused on the CTA’s application to Closely Held Businesses.  This webinar will focus on: 

• When is a closely held business considered a “reporting company” under the CTA? 
• What exemptions from CTA reporting are available to closely held businesses? 
• Who are considered the “beneficial owners” of a closely held business for this purpose, including: 
  • Trust ownership structures
  • Pass-thru entity structures
  • Non-U.S. family members
  • Family office involvement/control

• What personal identifying information must be collected from beneficial owners and provided to FinCEN? 
• Preparing and filing the initial BOI Report and updates/amendments 

Registration for the September 10 webinar is free to BABC members and clients and contacts of the firm. To register, please click here. 

As of September 1, there were only 4 months to act for these Pre-2024 Entities. Those who wait until the last minute (or even the last month of the year) to start their analysis and compliance efforts do so at their own risk.  The time to act is now. 

Disclaimer: The information in this communication, and any program referenced herein, is provided for informational purposes only. The information does not constitute legal advice, does not create an attorney-client relationship, and should not be construed as an offer to represent any person or entity. Duane Morris may undertake to provide advice to clients or prospective clients related to CTA compliance, but only when explicitly engaged to do so pursuant to a CTA-specific Duane Morris engagement letter.