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Author: Cath Ariola

Would Annual BOI Reports Make More Sense than Updated BOI Reports?

Posted on by Cath Ariola

Under the Corporate Transparency Act (CTA) regulations, reporting companies are required to file Beneficial Ownership Information (BOI) reports to the Financial Crimes Enforcement Network (FinCEN). Currently, the CTA mandates that entities file updated BOI reports within 30 days of any change in information about the entity or its beneficial owners.

While this approach is designed to ensure up-to-date records for law enforcement and regulatory purposes, it raises questions about practicality and efficiency. Would transitioning to an annual BOI reports make more sense?

The Burden of 30-Day Updates

The 30-day update requirement might be challenging for businesses to meet, especially those with multiple beneficial owners or frequent organizational changes. Consider the following scenarios:

  • Address Changes: If a beneficial owner moves to a new residence, the entity must file an update within 30 days.
  • Leadership Changes: A company hiring a new Chief Financial Officer (CFO) would trigger another required update.
  • Other Changes: Updates might also be needed for changes in entity address or registering a DBA.

Depending on the entity, changes could occur multiple times a year or once every few years. Monitoring these changes continuously and filing timely updates can place a significant administrative burden on companies. Small businesses and those with limited resources may find it particularly difficult to comply, increasing their risk of incurring penalties.

Advantages of Annual BOI Reports

An annual reporting system might alleviate some of these challenges. Here are some key benefits:

  1. Simplified Compliance: Filing a single report annually allows entities to review and consolidate all changes at once, reducing the likelihood of missing deadlines.
  2. Easier Integration: Professionals, such as accountants and attorneys, could incorporate BOI reporting into their clients’ broader annual service plans.
  3. Reduced Penalty Risks: The steep penalties for non-compliance under the current system—$591 per day—make it critical for entities to meet deadlines. An annual deadline would be easier to manage and less likely to result in inadvertent violations.

Potential Drawbacks of Annual BOI Reports

While annual reporting offers clear advantages, there are valid concerns:

  1. Delayed Updates: The purpose of the CTA is to provide law enforcement with timely and accurate information. Annual reporting could delay critical updates, potentially undermining the Act’s objectives.
  2. Increased Volume: Tens of millions of entities would be filing annual reports, resulting in an overwhelming volume of data for FinCEN to process and store. This could strain resources and reduce the efficiency of the reporting system.
  3. Redundancy for Static Entities: Many entities may experience no changes in their BOI information for years, if ever. Annual reporting for such entities could create unnecessary administrative overhead without adding value.

Would Annual BOI Reports Make More Sense?

The current 30-day update requirement ensures timely information but places significant demands on businesses. Transitioning to an annual BOI reporting system could simplify compliance and reduce risks for entities, particularly those with frequent changes. However, the potential trade-offs in data timeliness and administrative feasibility for regulators are valid points to consider.

Whether through annual reporting or updates-as-needed, the goal should be a balanced system that meets the needs of both businesses and regulators.

Key Considerations for BOI Reporting During Entity Transitions

Posted on by Cath Ariola

The Corporate Transparency Act (CTA) mandates the reporting of beneficial ownership information (BOI) for certain legal entities beginning in 2024. When altering the structure or jurisdiction of an entity—such as through dissolution and re-formation, merger, conversion, or adding registration jurisdictions, understanding how these changes affect BOI reporting obligations is critical. Below, we explore considerations for each type of transition.

Dissolution of an Entity in One Jurisdiction and Formation in Another Jurisdiction

Dissolving an entity in one jurisdiction and forming a new one in another is a comprehensive process involving liquidation, settling of liabilities, any other wrap up requirements needed to meet dissolution requirements. There could be various, major federal and state tax items to consider. The new entity that is formed in the other jurisdiction may also need a new Employer Identification Number (EIN), contributing to the reason that it will be a separate BOI reporting entity and would be considered a newly formed entity.

For BOI reporting purposes, if the original entity is fully dissolved before the CTA’s effective date (January 1, 2024), it may have no BOI reporting obligations. However, if the dissolution occurs after the effective date, an initial BOI report should be filed since the entity will still be subject to reporting requirements (See FAQ C.13 from FinCEN). Although, subsequent updates to the entity BOI may not be applicable if the entity no longer exists. This leaves the possibility of two BOI reports needing to be filed even though the intention was for the new one to replace the other.

While this method is an option, the associated costs and administrative burden are significant due to the need to transfer assets, comply with dissolution procedures, and possibly file an additional BOI report if the dissolution of the original entity is not formally completed or was done in 2024.

Merger of Entities

In a merger, one entity becomes the surviving entity while the other ceases to exist. This statutory transaction simplifies asset and liability transfers. The CTA implications are that the surviving entity would be the one that must file a BOI report reflecting its beneficial ownership. The non-surviving entity generally does not retain a separate reporting obligation, since it is no longer a legal entity. However, it is important to consider when the merger occurs. If it occurred after the CTA effective date of January 1, 2024, the non-surviving entity may still need to file an initial report since it met reporting obligations (FAQ C.13). The report would reflect the beneficial owners right before the merger occurred. After the merger, it would no longer be a legal entity, so any subsequent updated reports would not be required for that non-surviving entity.

Now, if both BOI Reports have been filed already and they undergo a merger, what entity is responsible for maintaining updated information with FinCEN? Given that the surviving entity is the only entity that remains legally in existence if the merger is executed correctly, it should be updated for any changes to beneficial ownership information because of the merger. Presumably, the other entity is no longer subject to reporting requirements and wouldn’t need to file any updated reports because of the merger since it ceases to exist at the end.

Statutory Conversion or Domestication

A statutory conversion (or domestication) is a seamless method for changing an entity’s formation state where it is authorized to conduct business. Typically, no separate BOI report is required for the entity as it exists after the conversion because the entity remains the same legal entity, just in a new jurisdiction. Some states don’t have these transactions available and may vary so it is important to ensure that no entity remains in the original jurisdiction to avoid unintended reporting obligations or compliance issues.

While a whole new initial BOI report may not be applicable, it will be important to update the existing BOI report for the entity to reflect the new “jurisdiction of formation”. Additionally, if the conversion required a change in the legal name—perhaps because the current name was not available in the new state—this does not automatically mean there is a need for a new BOI report. However, an updated report should be filed to reflect the change in legal name to ensure compliance with FinCEN requirements. Remember, updates to Beneficial Ownership Information are required to be filed within 30 days of a change.

Another common example that would result in the need for an updated BOI Report to be filed is upon the conversion from an LLC to a corporation, or vice versa. Given that in these conversions the legal name of the entities change – My Company, LLC to My Company, Inc., an updated report should be filed to reflect the new name (FAQ C.18).

Registration in Additional Jurisdictions

Registering an entity in a new jurisdiction while maintaining its original formation state is another aspect of compliance to consider. Per FinCEN’s FAQs, no additional BOI report is required for adding a registration in another jurisdiction if the original registration stays intact. If the entity subsequently dissolves in its original formation state, an updated BOI report must be filed to reflect the change in formation jurisdiction.

If the entity operates under the same EIN and name in both jurisdictions, it is typically treated as one entity. If a different name is required in the new jurisdiction, this alternative name should be included in the BOI report as equivalent to a DBA or trade name. Ultimately, there may be no resulting BOI reporting obligations when adding a jurisdiction. However, if it needs to be registered under a different name than its legal company name, an updated report will need to be filed within 30 days of the registration including that alternative name.

Evaluate BOI Reporting

Restructuring an entity—whether through dissolution and reformation, merger, conversion, or adding jurisdictions—is a common practice that allows businesses to adapt to changing needs. However, with the introduction of new BOI reporting obligations under the Corporate Transparency Act, it is key to evaluate how such transitions will affect reporting requirements.

By planning carefully, consulting with legal and tax professionals, and considering state-specific guidance, which can vary widely, entities can navigate these transitions effectively. A proactive approach ensures that restructuring decisions align with both business objectives and regulatory compliance.

Disclaimer: This blog article is intended for informational purposes only and does not constitute legal advice.  For advice on specific legal issues, please consult with a qualified attorney.

Entities Created in 2025 Have Shortened Window to Comply with the CTA

Posted on by Cath Ariola

The Corporate Transparency Act (CTA) is tightening its reporting requirements in 2025 for newly created entities, shortening the time available to comply with the CTA. Beginning January 1, 2025, any domestic or foreign reporting company newly established in the United States must file their initial Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN) within 30 days of their creation or registration.

This change marks a return to the original reporting timeline set by FinCEN after a temporary extension was granted for entities formed in 2024. Those entities enjoyed a 90-day window for initial BOI reporting, offering some breathing room during the early rollout of the CTA. However, this extended timeframe no longer applies in 2025.

In addition to the tight window for initial reporting, entities are also required to update FinCEN with any changes to their beneficial ownership information, such as changes in ownership or management, within the same 30-day timeframe.

Failure to comply with these reporting deadlines may result in significant penalties, including fines and potential criminal liability. To avoid these consequences, businesses should establish clear processes to ensure timely and accurate submissions.

For new entities formed in 2025 and beyond, the key takeaway is clear: Act fast—30 days isn’t much time!

Is the Injunction Helping or Hurting the Corporate Transparency Act (CTA)?

Posted on by Cath Ariola

The Corporate Transparency Act (CTA) has encountered significant obstacles in its implementation. Among the most critical is the recent preliminary injunction that prohibits its enforcement. In fact, on January 8, 2025, the third circuit court also issued a preliminary injunction as a result of a separate lawsuit, drawing the nationwide conclusion on the basis of the fifth circuit court ruling in early December 2024.

This development has sparked a debate on whether the injunction and stay is beneficial or detrimental to the CTA’s overall goals. By examining the pros and cons of this injunction, we can better understand its impact on business owners and professionals and the future of corporate transparency.

Pros of the Injunction and Stay: Visibility and Preparation

  1. Increased Awareness:

    One of the most notable benefits of the injunction is the heightened visibility of the CTA and its requirements. Prior to the stay, many business owners (and even professionals) were unaware of the reporting obligations under the CTA, despite the looming deadlines. The legal challenges and the ensuing publicity have brought the CTA into the spotlight, ensuring broader awareness of its implications, which were estimated to require almost 33 million entities to file reports.

  2. Extended Preparation Time:

    Another advantage is the additional time granted to businesses and their advisors to prepare for compliance. The original year-end deadline left many scrambling to understand and meet the requirements. With the enforcement paused, entities and professionals now have a chance to meticulously gather and organize the necessary information without the immediate pressure of looming penalties. This extension allows for more thorough education and planning, potentially reducing errors and improving overall compliance when enforcement resumes.

Cons of the Injunction and Stay: Confusion and Cost

  1. Confusion Among Business Owners:

    The injunction has created a wave of confusion, particularly for those who were just beginning to grasp the new filing requirements. For many small business owners, understanding the CTA was already a steep learning curve. The pause in enforcement has interrupted this process, leading to uncertainty about when, or if, they will need to comply. This ambiguity can undermine confidence in the system and discourage proactive compliance efforts.

  2. Increased Professional Costs:

    The injunction has also led to financial strain for many businesses. Those who sought professional assistance—such as attorneys, CPAs, or compliance experts—to navigate the CTA are now facing mounting expenses. Professionals must continuously update their clients on the evolving legal landscape, which often requires revisiting and revising compliance strategies. These ongoing updates result in additional costs that can be burdensome, particularly for small businesses. In fact, many professionals are encouraging certain clients to file voluntarily to eliminate the ongoing costs caused by the legal whiplash.

  3. Mental Fatigue and Frustration:

    Beyond financial costs, the prolonged uncertainty has taken a toll on the mental well-being of filers. Business owners, already burdened by the complexities of compliance, now face the frustration of repeated changes and delays. Is it better for businesses to voluntarily file to be done with it, or wait for the courts to conclude? This scenario fosters resentment and skepticism toward the government’s handling of the CTA, potentially eroding trust in the broader regulatory framework.

The Fate of Filed Reports

A significant concern is the status of the millions of reports that have already been submitted. If the CTA is ultimately invalidated, what becomes of the data collected? Current laws would likely mandate the disposal of this database, rendering the collected information inaccessible for any legitimate use. This outcome could undermine the intended purpose of the CTA and raise serious questions about the privacy and security of the data during its collection, storage, and disposal.

Do the Cons Outweigh the Pros?

While the pros of increased awareness and additional preparation time are important, the cons highlight deeper systemic issues, especially if the CTA is going to ultimately be enforceable in the end. The confusion, financial strain, and emotional fatigue caused by the injunction have far-reaching implications that could diminish trust in the CTA’s objectives.

Furthermore, the potential invalidation of the CTA and the disposal of submitted reports would represent a significant loss of resources and progress, further complicating the path forward.

Conclusion

The preliminary injunction against the Corporate Transparency Act presents a mixed bag of benefits and drawbacks. While it offers a valuable opportunity for increased education and preparation, it also introduces uncertainty and added costs that weigh heavily on businesses and their advisors. As we all await clarity on the CTA’s future, the government must prioritize transparent communication and decisive action to mitigate these challenges.

Considerations for Beneficial Owners Reaching the Age of Majority Requirement Under the CTA

Posted on by Cath Ariola

As businesses navigate their reporting obligations under the Corporate Transparency Act (CTA), an important consideration is the age of majority requirement for beneficial owners. If a beneficial owner is a minor at the time of filing and a parent or guardian’s information was used in place of the minor’s, the business must update its filing when the minor reaches the age of majority, as defined by the laws of the state in which the entity is formed.

Below, we outline the key points your clients should consider when dealing with minor beneficial owners and the age of majority requirement.

Understanding the Age of Majority Requirement

In the context of the CTA, if a minor beneficial owner (as defined by the laws of the entity’s state of formation) reaches the age of majority, and previously a parent or guardian’s information was used in place of the minor’s, an updated report must be filed to list the individual’s information. It’s important to note that the reporting requirement is tied to the state of formation of the entity, not necessarily the state where the minor resides.

For example, if a business is incorporated in a state where the legal age of majority is 18, but the minor beneficial owner lives in a state where the legal age of majority is 21, the business must file an updated report when the individual turns 18, as per the state of formation’s law.

Why This Matters

The key takeaway is that businesses must remain aware of any minor beneficial owners and track when they reach the age of majority in the state of formation. Failing to file an updated report promptly after the individual reaches the age of majority could result in non-compliance with CTA reporting requirements.

Age of Majority by State

Since the age of majority laws vary by state, businesses must understand the specific laws that apply to their state of formation. Below is a breakdown of the age of majority for various states:

  • 18 Years Old: AK, AZ, AR, CA, CO, CT, DE, FL, GA, HI, ID, IL, IN, IA, KS, KY, LA, ME, MD, MA, MI, MN, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VT, VA, WA, WV, WI, WY
  • 19 Years Old: AL, NE
  • 21 Years Old: MS

This list is important to cross-check as the age of majority laws may change. Businesses and professionals should reference this information when setting reminders for any updated reports required as a result of a minor coming of age.

Disclaimer: This article is intended for informational purposes only and does not constitute legal advice. For advice on specific legal issues, consult with a qualified attorney. 

Navigating Corrected or Updated BOI Reports Under the Corporate Transparency Act

Posted on by Cath Ariola

The Corporate Transparency Act (CTA) mandates that businesses file reports detailing their beneficial ownership information (BOI) to promote transparency and compliance. After filing the initial BOI report, entities may need to submit either corrected or updated BOI reports. While both types of filings aim to keep ownership information accurate, key differences exist in their content, timelines, and requirements. Below, we explore these distinctions and provide guidance to help your clients stay compliant with CTA reporting obligations.

Key Differences Between Corrected or Updated BOI Reports

The primary distinction between corrected and updated reports lies in when the changes are deemed effective. A corrected report addresses inaccuracies in previous filings, such as missing or incorrect information, and the changes are applied retroactively. In contrast, an updated report reflects real-time changes, with the updated information taking effect immediately upon filing.

Here is a breakdown of the differences:

  • Corrected Report: Used to rectify inaccuracies or omissions in previous filings, with changes reflecting the period covered by the last report.
  • Updated Report: Reflects real-time changes, with the new information becoming effective at the time the report is filed.

When Are Corrected Reports Due?

A corrected report must be filed within 30 calendar days from the date the company becomes aware of an inaccuracy or has reason to know about it. The clock begins when the entity becomes aware of the error, not necessarily when the issue first occurred. Section 31 U.S.C. 5336(h)(3)(C) provides a safe harbor provision, allowing businesses to file a corrected report within 90 days from the date of the incorrect filing without facing penalties. However, this safe harbor does not apply if a company files a corrected report more than 90 days after the inaccurate filing.

When Are Updated Reports Due?

An updated report must be filed within 30 calendar days of certain changes, including:

  • Change of Address: The entity’s principal address changes.
  • New Doing Business As (DBA) Name: The company adopts a new DBA name.
  • Adding or Removing Beneficial Owners: Any changes in the beneficial owners.
  • Changes in Beneficial Owner Information: Any changes to the current beneficial owner’s personal details (e.g., legal name, address, or ID number).
  • A Minor Beneficial Owner Reaches the Age of Majority: A minor that meets the definition of a beneficial owner reaches the age of majority, as defined by the laws in which that entity is formed.

Given the tight reporting window, it is crucial to stay vigilant about tracking changes, including minor ones, such as a new person qualifying as a beneficial owner due to their substantial control.

Establishing a System for Compliance

To ensure your clients remain compliant with CTA requirements, it is essential to establish a system (or advise clients to establish one) for handling both corrected and updated reports. This system should include mechanisms for regularly reviewing and updating BOI information to prevent delays or errors. Clients should be educated about their ongoing reporting obligations, and your firm should have clear procedures in place to handle changes quickly and accurately if assisting with this ongoing reporting.

By setting up internal standard operating procedures (SOPs), you can help clients minimize the risk of non-compliance.

Special Cases for Corrected Reports

FinCEN provides limited guidance on handling situations where a beneficial owner refuses to cooperate or is estranged. In such cases, FinCEN emphasizes that the reporting company is ultimately responsible for ensuring the report is filed accurately. Businesses are advised to implement procedures to gather the required information promptly and may want to consult their insurance provider to develop safeguards if the required information cannot be obtained in time.