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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.
