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CTA Compliance & Advisory

Practice Area Overview

Practice Areas
Team

The CTA Compliance & Advisory Practice supports the Firm’s Corporate & Transaction Group and the Private Client Group in advising clients on their reporting requirements to the Financial Crimes Enforcement Network (“FinCEN”) under the Corporate Transparency Act (“CTA” or the “Act”).  With a history and focus on government reporting and compliance matters, as well as decades of experience in tax and tax reporting, Teeple Hall, LLP is well-positioned to guide Reporting Companies through the complexities of the CTA, providing necessary support for our clients.

The CTA went into effect on January 1, 2024, and mandates that all non-exempt “Reporting Companies,” meaning domestic entities that are incorporated by the filing of a document with a Secretary of State or equivalent office of any U.S. state or territory, as well as foreign entities which are qualified to do business with any Secretary of State or equivalent office in any U.S. state or territory, must disclose information and identifying documents for all Beneficial Owners of a Reporting Company, known as “beneficial ownership information” or “BOI.” Generally speaking, a “Beneficial Owner” is a natural person who:


(1) Owns at least 25% of the Reporting Company (directly or indirectly), and/or 
(2) Exerts “substantial control” over the Reporting Company’s activities. 

 

Identifying and navigating the nuances of beneficial ownership can be a complex undertaking. Nevertheless, ensuring accurate and timely submission of beneficial ownership information reports (“BOI Reports”) is crucial as non-compliance with the CTA’s specific reporting requirements, including the list of all Beneficial Owners and certain personal information, carries potential penalty exposure. The CTA imposes severe penalties for failure to timely and accurately comply with initial and ongoing reporting requirements including, at a minimum, civil penalties of up to $591 per day for willfully submitting misleading information or failing to report, along with potentially substantial criminal exposure including prison sentences and hefty criminal penalties.

It is important to note that there is a distinction between (1) analysis and mapping of Beneficial Owners of a Reporting Company at a static point in time; and (2) filing BOI Reports with FinCEN, monitoring changes in Beneficial Owners and BOI on a dynamic basis, and filing updated BOI Reports with FinCEN, as necessary.

 

Each Reporting Company is responsible for completing and filing its BOI Reports with FinCEN, as required under the CTA.  The Reporting Company is responsible for monitoring changes or updates to its Beneficial Owners, changes or updates to the beneficial ownership information, and filing subsequent BOI Reports, as necessary.

  • UPDATE AS OF MARCH 12, 2024: CTA RULING IN U.S. DISTRICT COURT OF NORTHERN DISTRICT OF ALABAMA
    Dated March 12, 2024 On March 1, 2024, in Nat’l Small Bus. United v. Yellen, No. 22-cv-1448 (N.D. Ala. Mar. 1, 2024), ECF No. 51, the U.S. District Court of the Northern District of Alabama ruled that the CTA is unconstitutional and cannot be enforced against the plaintiffs of the case, the members of the National Small Business Association (“NSBA”) as of March 1, 2024. On March 4, 2024, the Financial Crimes Enforcement Network (“FinCEN”), the agency tasked with enforcing the CTA, released a statement declaring that it intends to respect the terms of such ruling but will continue to enforce the reporting requirements of the CTA for all other entities, meaning all qualifying entities that were not members of the NSBA as of March 1, 2024, stating, “reporting companies are still required to comply with the law and file beneficial ownership reports as provided in FinCEN’s regulations.” Additionally, on March 11, 2024, the Department of Justice, on behalf of the Department of the Treasury (of which FinCEN is a branch), filed an appeal against the ruling, meaning a federal appellate court will review and rule on the case at some point in the future. Reporting Companies not directly associated with this ruling should continue to prepare to comply with the reporting requirements of the CTA within the appropriate timeframes.
  • UPDATE AS OF JANUARY 26, 2024: INCREASED MONETARY CIVIL PENALTY FOR CTA NONCOMPLIANCE
    Dated January 26, 2024 On January 25, 2024, FinCEN increased the maximum civil monetary penalty for beneficial ownership information violations from $500 per day to $591 per day. Although this was done to account for inflation, the more severe civil penalty underscores the importance of accurately and timely filing BOI Reports, including proactively filing updated BOI Reports, when necessary.

Reporting obligations under the CTA are the responsibility of the Reporting Company, and our role as attorney is to advise on the requirements of the CTA and the application of the Act relevant to the Reporting Company.

We offer a comprehensive range of services to clients (Reporting Companies), with a particular focus on entities with complex ownership and management structures, including:

  • Analysis and advice on whether an entity meets the definition of a Reporting Company under the Act;

  • Analysis and advice on whether a Reporting Company meets the requirements for one of the available exemptions from CTA reporting (as of April 3, 2024, there are twenty-three (23) exemption categories);

  • Analysis and advice for foreign entities regarding their U.S. business or operating activities, which may require or mandate a foreign entity to register or qualify with one or more U.S. states or territories, thus resulting in a foreign entity to fall within the definition of a “Reporting Company” under the Act;

  • Analysis, evaluation, and mapping of a Reporting Company’s current Beneficial Owners (i.e., identifying natural persons holding at least 25% interest in the Reporting Company; identifying natural persons who exercise substantial control over the Reporting Company; evaluating the operative documents of the Reporting Company (e.g., bylaws, partnership agreements, operating agreements, etc.));

  • Advice and coordination of any updates and/or amendments of a Reporting Company’s operative documents (shareholders agreement, partnership agreement, etc.) to add provisions which mandate owners, officers, and directors to provide personal identifying documents to the Reporting Company so that the Reporting Company can comply with its legal obligations under the CTA;

  • Advice on the development, implementation, and oversight of “best practice” procedures for Reporting Companies to address their CTA reporting requirements in a timely and ongoing manner including, but not limited to, the maintenance of compliance audit histories; 

  • Advice and counsel to a Reporting Company in situations in which it is facing audit, penalty notices, or regulatory actions for failure to timely and accurately fulfill its CTA reporting requirements; and

  • Coordination of BOI filing and monitoring through our CTA Monitoring Program (“CTAMP”).

Teeple Hall, LLP provides legal advice regarding CTA matters only on an express, written, retained basis for an identified Reporting Company.  For more information, please contact our office.

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Resource Links

To learn more about the CTA and its BOI reporting requirements, please refer to the following:

The Corporate Transparency Act (CTA)

Beneficial Ownership Information Reporting

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