Transcript
Greg Corombos: Hi, I'm Greg Corombos. Our guest in this edition of Expert Insights is Sandra Feldman, Publications Attorney for CT Corporation. Our conversation today as part of our series on compliance with the Corporate Transparency Act. Today, Sandra is here to tell us about recent guidance from the Financial Crimes Enforcement Network, or FinCEN, about the beneficial ownership information reporting obligations of companies that have ceased to exist as a legal entity. And Sandra, thanks so much for being with us again.
Sandra Feldman: Thank you, Greg. On July 8, FinCEN updated the beneficial ownership information FAQs to include responses to questions that they received, about whether entities that are in the process of dissolving or that have already ceased to exist have to file an initial BOI report as required by the federal Corporate Transparency Act. And this is a very significant update from FinCEN because it impacts many companies. And at CT, we’ve received a lot of questions about whether a company that's either in the process of dissolving, or that has completed the process and no longer has a legal existence, has to file a BOI report. And in this podcast, I will tell the listeners what FinCEN had to say.
Greg Corombos: All right, let's get into some of this clarification. What did FinCEN say about whether entities that ceased to exist have to file a BOI report?
Sandra Feldman: FinCEN’s guidance distinguishes between companies that ceased to exist as a legal entity before January 1, 2024, which is the day the BOI reporting requirement went into effect, and reporting companies that ceased to exist on or after January 1, 2024. And the short answer is that companies that cease to exist before January 1, 2024, don't have to file an initial BOI report, while companies that existed for any period of time on or after January 1 2024 and that meet the definition of a reporting company do have to file an initial BOI report. And that's the short answer. But of course, FinCEN has more to say in its FAQ than that.
Greg Corombos: I'm sure that they do have a lot more to say. So let's dig into that as well, starting with companies that ceased to exist before January 1, 2024. What exactly does FinCEN say about them?
Sandra Feldman: According to FinCEN, a company that ceased to exist as a legal entity before the BOI reporting requirements became effective on January 1, 2024, were never subject to the reporting requirements, and therefore they do not have to file a BOI report.
Greg Corombos: Did FinCEN explain what it means by a company ceasing to exist as a legal entity? Because it's possible not everyone understands what that term means.
Sandra Feldman: That's a very good question. I'm glad you asked that, because there is no universal definition of ceasing to exist as a legal entity. So it's important to understand what FinCEN means, and according to FinCEN, when they refer to a company ceasing to exist as a legal entity, what they mean is that the company entirely completed the process of formally and irrevocably dissolving. FinCEN points out that state laws vary, but typically, a company completes the process of formally and irrevocably dissolving by, for example, filing dissolution paperwork, receiving written confirmation of dissolution, paying related taxes or fees, ceasing to conduct any business and winding up its affairs by, for example, fully liquidating itself and closing all its bank accounts. FinCEN also states that for specifics on how to determine when a company ceases to exist as a legal entity, you need to consult the law of the relevant jurisdiction. And I would also add that if you aren't sure if your company has completed the process and ceased to exist before January 1, 2024, you might want to consult with an attorney.
Greg Corombos: So let's talk about the companies that did exist after the beginning of the year. What about a company that ceased to exist on or after January 1, 2024? What do the FinCEN FAQs say about those companies?
Sandra Feldman: FinCEN’s guidance when it comes to companies that existed on or after January 1, 2024, and later ceased to exist, applies only to reporting companies. So I'd like to first remind everyone of the definition of a reporting company. The reporting company is a corporation, LLC, or other entity created by the filing of a document with the Secretary of State or similar office or created under the laws of a foreign country and registered to do business by filing a document with the Secretary of State or similar office and that does not qualify for an exemption. And FinCEN says that if a reporting company continued to exist as a legal entity for any period of time on or after January 1, 2024, that reporting company must file its initial BOI report, even if it ceased to exist before the due date for its initial report.
Greg Corombos: What if a reporting company started the process of formally dissolving before 2024 but didn't complete the process before 2024?
Sandra Feldman: FinCEN’s FAQs states that a BOI report is required to be filed by reporting companies that began the dissolution process before January 1, 2024, and even those that had wound up their affairs and ceased doing business before January 1, 2024, but did not complete the process before January 1, 2024. Because they didn't complete the process, they still existed as a legal entity in 2024 and therefore must file an initial BOI report.
Greg Corombos: What about reporting companies created or registered on or after January 1, 2024, that later cease to exist? Does FinCEN’s FAQs specifically address those reporting companies?
Sandra Feldman: It does. And FinCEN says that all reporting companies created or registered on or after January 1, 2024, are required to file an initial BOI report, even if they ceased to exist before the due date of that BOI report.
Greg Corombos: So FinCEN’s guidance requires reporting companies that existed as a legal entity on or after January 1, 2024, to file an initial BOI report by the due date. So can you remind us of when those initial BOI reports are due?
Sandra Feldman: The initial BOI report for a reporting company that was created or registered before January 1, 2024, is due by January 1, 2025. Reporting companies created or registered in 2024 have to file their initial BOI report within 90 calendar days of receiving actual or public notice of their creation or registration. Reporting companies created or registered in 2025 and beyond are required to file an initial BOI report within 30 calendar days of receiving actual or public notice of their creation or registration.
Greg Corombos: There’s always more nuance, Sandra. So what about companies that are administratively dissolved? Does FinCEN address those companies?
Sandra Feldman: They do, and that's an important point. This guidance applies to a company that is administratively dissolved or suspended, as well as one that's voluntarily dissolved. And as a reminder, administrative dissolution can happen if a company fails to comply with certain jurisdictional requirements, such as filing an annual report, paying a franchise tax, or maintaining a registered agent. So based on these FAQs, if an administratively dissolved or suspended company ceased to exist as a legal entity before January 1, 2024, it would not have to file a BOI report. But if it continued to exist on or after January 1, 2024, and [was then] administratively dissolved or suspended, [the] reporting company will have to file a BOI report. FinCEN points out that, generally, [an] administratively dissolved or suspended company does not cease to exist as a legal entity unless the dissolution of suspension [becomes] permanent.
Greg Corombos: Okay, Sandra, what if a reporting company files its initial BOI report and then ceases to exist? Is it still required to file anything with FinCEN to let them know that it now ceases to exist?
Sandra Feldman: FinCEN says in this FAQ that if a recording company files an initial BOI report and then ceases to exist, there is no requirement for the reporting company to file an additional report with FinCEN noting that the company has ceased to exist.
Greg Corombos: I think we've covered the vast majority of contingencies here. Any final comments based on what you've learned from FinCEN’s FAQs
Sandra Feldman: Just this friendly reminder. We're aware that some reporting companies that were planning on dissolving, or had begun or completed the process of dissolving, or that were administratively dissolved, have not filed their initial BOI report yet because their owners, managers, or compliance officers were unsure whether the company had to file, and they were waiting for guidance from FinCEN. Well, now FinCEN has provided guidance. I'd like to remind the listeners to make sure to file their reporting company's initial BOI reports by the due date, if based on this guidance, they now believe their company is required to file a BOI report. And remember, there are significant penalties that can be imposed for noncompliance with the BOI reporting requirements.
Greg Corombos: Sandra, terrific and very helpful information. As always, thanks so much for your time and your expertise today.
Sandra Feldman: I appreciate you having me.
Greg Corombos: Sandra Feldman is Publications Attorney at CT Corporation. I'm Greg Corombos reporting for Expert Insights. And for more information on this subject, please visit ctcorporation.com.
