Five Steps for Businesses Trying to Comply with the Corporate Transparency Act

The new federal Corporate Transparency Act (CTA) is here, and it’s crucial for companies to understand its implications. Designed to combat money laundering and tax fraud, the CTA requires businesses to disclose their beneficial owners by January 1, 2025. If your company isn’t exempt, now is the time to prepare.

Unsure of where to start? Isaac Wiles has created an interactive portal to guide you through the filing process, and we can assist you in identifying beneficial owners and navigating reporting requirements.

The first filing deadline – Jan. 1, 2025 – is fast-approaching for companies required to comply with the new federal Corporate Transparency Act (CTA).

The CTA was designed to assist the government in determining international investment in U.S. companies and shell companies in an effort to combat money-laundering, tax fraud and financial support of terrorism. But in doing so, it forces companies to make annual reports detailing their beneficial owners.

With the deadline just around the corner, we offer five steps companies can take to comply:

1. Determine if your business is exempt. There are 23 exemptions under the CTA, so check here to see if any might apply to your company. Inactive companies are exempt, as are several types of financial institutions, including banks, credit unions, securities brokers/dealers, as well as insurance companies, accounting firms and public utilities. Also, if your business is controlled or wholly owned – directly or indirectly – by one or more exempt entities, you may also be exempt from CTA reporting.
2. Check the deadlines. If your company is not exempt and your business entity was formed or registered before January 1, 2024, you must file an initial report no later than the January 1, 2025 deadline we mentioned above. Entities formed in 2024 must file an initial report within 90 calendar days of formation or registration.
3. Get to know the BOIR. This is the acronym for the Business Ownership Information Report that must be filed if you are not exempt. Review the report here to see what’s required and general steps on completing the form. The good news is that there are many convenient ways to file. You can independently prepare and file your report online using one of two options, or you can take advantage of the online portal the attorneys at Isaac Wiles have set up that will guide you through each step of the filing process (more on this below).
4. Determine your beneficial owners. A two-pronged test – ownership and substantial control – will help you determine which individuals are required to report. A “beneficial owner” is a person who directly or indirectly owns or controls 25% or more of the ownership interests of the reporting company. “Substantial control”, meanwhile, means that your managerial role allows you to exert substantial control over the organization. And it’s not just the CEO, but anyone who can direct, determine, or have substantial influence over important decisions made by the reporting entity.
5. Beware the many caveats. For example, if a beneficial owner owns 25% or more of the ownership interests of a reporting company exclusively through one or more exempt entities, then beneficial ownership information may not need to be reported. Additionally, some equity may not need to be included in computing the ownership percentage. So, while options and put or call rights are generally deemed to be included in the CTA ownership analysis, they may be left out of the calculation to the extent they are held by third parties without the reporting company’s knowledge or involvement.

Still confused? Overwhelmed? Not sure where to start or how to prepare the BOIR? As mentioned above, Isaac Wiles has created an online interactive portal that will make determining whether you need to file and, if so, working through each of the filing steps, much easier. Regardless of how you choose to handle the filing, Isaac Wiles attorneys can be there to help any step on the way.The first filing deadline – Jan. 1, 2025 – is fast-approaching for companies required to comply with the new federal Corporate Transparency Act (CTA).