Injunction Lifted - Corporate Transparency Act Reporting Requirements Are Back in Effect with a New Deadline

On February 18, 2025, the nationwide injunction against enforcement of the Corporate Transparency Act (CTA) was vacated, meaning the CTA’s Beneficial Ownership Information (BOI) reporting requirements are now in effect.

The Financial Crimes Enforcement Network (FinCEN) has issued an Alert announcing that for most reporting companies the new deadline to file an initial, updated and/or corrected BOI report is March 21, 2025. FinCEN’s Alert, posted today, can be read here.

Recap of CTA Requirements

What Companies Must File BOI Reports?

The CTA’s reporting requirements apply to “reporting companies,” which include practically every corporation, limited liability company and other entity created by the filing of a document with a public official, unless one of the twenty-three exemptions listed here applies. Most of the exemptions are extremely narrow. While the exemption for a “Large Operating Company” (LOC) is not narrow, the exemption depends on meeting several requirements which must be carefully analyzed. If you think your company might satisfy the requirements of the LOC exemption or any other exemption, please reach out to your BWMS attorney or a member of the BWMS CTA Compliance Team listed on this alert for guidance.

De Minimis Companies are not Exempt

Please keep in mind that there is no CTA exemption for companies that are seemingly insignificant and engage in virtually no activity. For example, a single-member LLC existing solely to hold title to a house would not qualify for the “inactive entity” exemption and must file a BOI report.

What is a BOI Report?

A BOI report is filed through the online portal (https://www.fincen.gov/boi) of FinCEN, the agency within the Department of the Treasury charged with enforcing the CTA. There is no fee for filing a BOI report. Each reporting company is required to provide the following information in its BOI report:

1. Its full legal name.
2. Any trade names or “doing business as” names.
3. Its EIN or other tax identifier.
4. Its complete current U.S. business address.
5. Its jurisdiction of formation (state, tribal or foreign).
6. The following information (BOI) for each beneficial owner of the reporting company:
1. Full legal name
2. Date of birth
3. Complete current residential street address
4. A unique identifying number from an acceptable identification document (e.g., passport, driver’s license or other government-issued identification document)
5. An image of the non-expired governmental identification that supplies such unique identifying number, which must be uploaded to the FinCEN website

An individual may obtain a personal FinCEN ID number which can be reported in lieu of the BOI listed in 6(a) through (e) above. Having a FinCEN ID number facilitates multiple filings where an individual is a beneficial owner of several reporting companies. 

Who is a Beneficial Owner?

There are two distinct tests for who is a beneficial owner. A “beneficial owner” is any individual who, directly or indirectly:

• Exercises substantial control over a reporting company

OR

• Owns or controls at least 25% of the ownership interests of a reporting company.

The first test for being a beneficial owner is whether an individual directly or indirectly holds “substantial control” over the reporting company. While there are certain categories such as “senior officers” of a reporting company who are clearly regarded as having substantial control, the test can be complicated and very fact-dependent, often requiring review of the reporting company’s organizational documents (e.g., the operating agreement of an LLC). Under this test, an individual can be a beneficial owner under the CTA despite having no actual ownership interest in the reporting company.

The second test focuses on the individuals who directly or indirectly own or control 25% or more of the “ownership interests” in a reporting company. The term “ownership interests” includes stock and LLC interests, as well as options, warrants and in some instances even debt. Therefore, a shareholder in a corporation holding 20% of the outstanding shares who holds an option to acquire an additional 10% of the shares would be considered to be the owner of a 30% interest and above the 25% reporting threshold. As another example of the potential subtlety of the test, if an individual who personally owns a 10% interest in an entity also controls other ownership interests in the entity (e.g., a parent serving as trustee for children under three trusts each owning a 5% interest), the percentage of ownership controlled by that individual would be the total (in the foregoing example 10% + 5% +5% +5% = 25%).

In many cases, the analysis of which individuals are deemed beneficial owners is quite simple and straightforward, and in other cases it is complicated. Please consider your situation as soon as possible and contact your BWMS attorney or a member of the BWMS CTA Compliance Team listed on this alert for guidance.

Act Now!

There are severe penalties imposed for failing to file a required BOI Report with FinCEN in a timely manner. Consequently, it is critical for you to review every entity in which you have a direct or indirect ownership interest or over which you directly or indirectly exercise any control. 

Please review your situation as soon as possible and contact your BWMS attorney or a member of the BWMS CTA Compliance Team listed on this alert for guidance.