The Corporate Transparency Act’s (CTA) deadline is approaching quickly. You must file Beneficial Ownership Information (BOI) reports by January 1, 2025, for any non-exempt entities formed prior to January 1, 2024.
You have one quarter left to finish your legal analysis, compile your beneficial ownership information, and file your reports with FinCEN. There’s no time to waste.
Atlas, Ontra’s AI-powered legal entity management solution, is ready to digitize your entity information and automate CTA compliance tasks. With Atlas, you can:
- Manage beneficial ownership information for all entities in one AI-enabled platform
- Designate which entities require CTA filings and which are exempt
- Quickly reference key identity details required for BOI reporting
- Make updates to beneficial ownership information that automatically apply across entities and structures
- Automate FinCEN filing for non-exempt entities
Schedule an Atlas demo today and see how Atlas supports CTA compliance with automated BOI filings.
Late or inaccurate BOI reports are subject to fines & criminal penalties
Individuals and corporate entities can face civil and even possible criminal penalties for willfully failing to report or update a reporting company’s BOI and providing false or fraudulent BOI to FinCEN.
According to FinCEN’s Beneficial Ownership Information FAQ (FinCEN FAQ) K.2., civil penalties include a $591 daily fine per continuing violation — the amount is adjusted annually for inflation. Given the nature of the daily fines per violation, fund managers could face steep penalties for delayed filings or honest mistakes.
Criminal penalties include up to two years’ imprisonment and a fine of up to $10,000.
Your five next steps
1. Analyze legal entities for exempt vs. non-exempt status
Unless an exemption exists, the CTA requires all U.S. domestic and certain non-U.S. legal entities to disclose information about themselves, their beneficial owners and, in some cases, up to two company applicants.
Many of your legal entities are likely exempt from the BOI reporting requirements. Yet special purpose vehicles, holding companies, aggregators, and blockers related to fund and portfolio structuring might not be exempt.
You and your outside counsel must determine which of your legal entities are exempt and, importantly, whether your entity management solution supports efficiently evaluating each legal entity and filing the necessary BOI reports.
As outlined in FinCEN FAQ C.2., the CTA exempts 23 entity types:
- Securities reporting issuer
- Governmental authority
- Bank
- Credit union
- Depository institution holding company
- Money services business
- Broker or dealer in securities
- Securities exchange or clearing agency
- Other Exchange Act registered entity
- Investment company or investment adviser
- Venture capital fund adviser
- Insurance company
- State-licensed insurance producer
- Commodity Exchange Act registered entity
- Accounting firm
- Public utility
- Financial market utility
- Pooled investment vehicle
- Tax-exempt entity
- Entity assisting a tax-exempt entity
- Large operating company
- Subsidiary of certain exempt entities
- Inactive entity
2. Analyze beneficial owners
According to FinCEN FAQ D.1., a beneficial owner is an individual who either directly or indirectly:
- Exercises substantial control over a reporting company, or
- Owns or controls at least 25% of a reporting company’s ownership interests.
An individual can exercise substantial control over a reporting company in four ways, according to FinCEN FAQ D.2.; the person:
- Is a senior officer, e.g, the CEO, president, CFO, GC, COO, or any other officer who performs a similar function
- Has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company
- Is an important decision-maker for the reporting company
- Has any other form of substantial control over the reporting company
Additionally, beneficial owners must be natural persons, so trusts, corporations, or other legal entities are typically not considered beneficial owners.
If there are any changes to the entity or its beneficial ownership information — or you need to correct an inaccuracy — after filing the initial report, you must file an updated or corrected report no later than 30 days after the date of the change or awareness of the mistake, as explained in FinCEN FAQ H.1. and I.1.
3. Analyze company applicants
FinCEN FAQ E.1. & 2. explain non-exempt reporting companies created or registered on or after January 1, 2024, and foreign reporting companies first registered to do business in the U.S. on or after January 1, 2024, must report their two company applicants, who are:
- The individual who directly files the document that creates or registers the company; and
- If more than one person is involved in the filing, then the individual primarily responsible for directing or controlling the filing.
In the future, you are not required to file an updated BOI reporting if information about a company applicant changes.
You are also not required to include company applicant information if the reporting company was created in the U.S. before January 1, 2024, or is a foreign reporting company first registered in the U.S. before January 1, 2024.
4. Gather up-to-date information
Hunting down the necessary information for BOI filings can be a challenge if you’re relying on old-school, decentralized entity management processes. Paperwork and information might live in separate files, significantly increasing the time it takes your firm to gather the necessary entity, beneficial owner, and company applicant information. A modern entity management solution with a single source of truth can drastically improve this process.
As outlined in FinCEN FAQ F.2., for every reporting company, you must file:
- The full legal name of the reporting company
- All trade names, fictitious names, or names the company is doing business under, regardless of whether the name is registered
- The street address of the company’s principal place of business
- The state or tribal jurisdiction of formation
- The IRS taxpayer identification number
As outlined in FinCEN FAQ F.3. & 4., for each beneficial owner or company applicant, you must report:
- Their full legal name
- Their date of birth
- Their current residential or business street address
- A unique identifying number from an acceptable identification document and a legible image of the identification document corresponding to the unique identifying number
5. Request a FinCEN identifier as needed
A “FinCEN identifier” or FinCEN ID is a unique number that FinCEN issues upon request after you provide certain information. You are not required to get a FinCEN identifier, but doing so can simplify the reporting process and allow individuals or entities to provide the required identifying information directly to FinCEN. A person or reporting company can only have one FinCEN ID.
FinCEN issued specific criteria regarding when a reporting company can use a FinCEN identifier in lieu of information about an individual beneficial owner. You can find more information in FinCEN’s Small Entity Compliance Guide.
Do you have the right tools to file CTA reports quickly & efficiently?
It isn’t too late — you can streamline CTA compliance with Atlas now.
If you lack a centralized legal entity management solution like Atlas, preparing BOI reports for the CTA might be a largely manual endeavor without a defined process. Your fact-intensive analysis, followed by time-consuming data collection, could lead to late filings or mistakes.
Leading private fund managers are taking a different approach. Our customers have been implementing Atlas this year to digitize and centralize their legal entity information and build new processes to support CTA compliance, including automated BOI filing with FinCEN.
Ontra offers white-glove service to help you implement Atlas without disrupting your current operations. Get started today by scheduling an Atlas demo.
