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The Entrepreneur’s Up to Date Guide to the FinCEN Corporate Transparency Act (as of 12/27/24)
Understanding the who, what, when, and why of the BOI and if it applies to your business.
By Dr. Adrienne B. Haynes, Esq., Managing Partner, SEED Law
(up to date as of 2/13/25)
TL;DR
Implementing Body: The Financial Crimes Enforcement Network (FinCEN), a U.S. Treasury Department bureau
Rule Name: Corporate Transparency Act (CTA) effective January 1, 2024 (enacted in 2021)
Rule Requirements: To curb illicit finance, Reporting Companies must report information to the Financial Crimes Enforcement Network (FinCEN) about the individuals who ultimately own or control them. Filing is simple, secure, and there is no FinCEN filing fee. Beneficial ownership information reporting is not an annual requirement. A report only needs to be submitted once, unless the filer needs to update or correct information.[1]
Applies to: Reporting Companies include 1) corporations, limited liability companies (LLC), or other entities created in the United States by filing a document with a Secretary of State or any similar office under the law of a state or Indian tribe; and 2) foreign companies registered to do business in any U.S. state or Indian tribe by such a filing.
(Exempt: Twenty-three types of entities are exempt from beneficial ownership information reporting requirements, including publicly traded companies, nonprofits, and certain large operating companies. See the list under Section 1.2 here)
Deadline: As of January 2, 2025, FinCEN’s website instructs that “[i]n light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”[2]
Penalty: Varies, but civil penalties of up to $591 for each day that the violation continues, as well as criminal penalties of up to two years imprisonment and a fine of up to $10,000.
SEED Law support: Flat fee for entities with 1 or 2 owners. Hourly for entities with 3 or more owners. Voluntary submission only as of 1/8/25.
— — To read the full article, please continue reading below:
In 2021, The Financial Crimes Enforcement Network (FinCEN), a U.S. Treasury Department bureau, enacted the Corporate Transparency Act (CTA), requiring eligible entities to file a Beneficial Ownership Information (BOI) Report. The purpose of this reporting requirement is to “protect the U.S Financial System from illicit use”. The original rule gave existing entities one year to file, beginning on January 1, 2024 with a deadline of January 1, 2025. For entities created after January 1, 2025, owners will have 90 days from formation to file this report.
The BOI requests details about entity ownership. FinCEN defines a beneficial owner to be “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.” Reporting companies need to report just a few pieces of information about themselves and their beneficial owners — and in some cases, their company applicants — such as name, address, and date of birth.
Due to the sensitive nature of some of the details requested, business owners have been rightfully concerned about who may have access to this information. From the FinCEN website, “The CTA allows for the following groups to access beneficial ownership information:
· Federal, State, local, and Tribal officials, as well as certain foreign officials who submit a request through a U.S. Federal government agency, for authorized activities related to national security, intelligence, and law enforcement;
· Financial institutions in certain circumstances, with the consent of the reporting company; and
· Those financial institutions’ regulators when they supervise the financial institutions.
The database uses rigorous information security methods and controls typically used in the Federal government to protect non-classified yet sensitive information systems at the highest security level.”
There have been several lawsuits challenging the validity of the CTA. As of December 2024, there are several key dates to be aware of that have a national impact on the BOI reporting requirement:
· On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., №4:24-cv-00478 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction. Per FinCEN, “Texas Top Cop Shop is only one of several cases that have challenged the Corporate Transparency Act (CTA) pending before courts around the country.” [1]
· On December 23, 2024, a panel of the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction entered in the case of Texas Top Cop Shop, Inc. v. Garland, pending the outcome of the Department of the Treasury’s ongoing appeal of the district court’s order. FinCEN immediately issued an alert notifying the public of this ruling, and recognizing that reporting companies may have needed additional time to comply with beneficial ownership reporting requirements, FinCEN extended reporting deadlines (January 13, 2025). [2]
· On December 26, 2024, however, a different panel of the U.S. Court of Appeals for the Fifth Circuit issued an order vacating the Court’s December 23, 2024 order granting a stay of the preliminary injunction. Accordingly, as of December 26, 2024, the injunction issued by the district court in Texas Top Cop Shop, Inc. v. Garland is in effect and reporting companies are not currently required to file beneficial ownership information with FinCEN. [3]
For entities interested in voluntary submission at this time, the SEED Law process begins with this intake form.
Regarding the penalty for noncompliance, FinCEN has stated that “[a] person who willfully violates beneficial ownership reporting requirements may be subject to civil penalties of up to $591 for each day that the violation continues, as well as 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.” [4]
If the requirement to file is reinstated after the court decisions, “FinCEN intends to extend the reporting deadline for all reporting companies 30 days from the date the stay is granted.[5]”
Requirements and notices can be tracked directly from FinCEN here (https://www.fincen.gov/boi) and through their FAQ page here (https://www.fincen.gov/boi-faqs). We encourage all SEED Law clients to work towards full compliance at a local, county, state, and federal level.
This article is an overview of the new FinCEN legal considerations, including reporting, changes, and timelines but it does not cover every legal right or obligation, consideration, exception, or restriction. These decisions are complex and should be well researched and discussed with an attorney before being made.
If you have any questions, please email adrienne@seed.legal or give us a call anytime at 816–945–4249. To schedule a consultation with a SEED Law attorney, please use this calendaring tool to find a time that works best for you.
[1] https://www.fincen.gov/boi
[2] https://www.fincen.gov/boi
[3] https://www.fincen.gov/boi
[4] https://www.fincen.gov/boi/toolkit
