Establishing compliance responsibilities
When entering into a joint venture, you must establish who maintains entity compliance and understand compliance deadlines. Key filing requirements to know for reporting companies are as follows:
- Existing companies – Domestic reporting companies created before January 1, 2024, and foreign reporting companies registered to do business in the U.S. before January 1, 2024, must file a beneficial ownership information report (BOIR) with FinCEN by January 1, 2025.
- New companies – Domestic reporting companies created on or after January 1, 2024 and foreign reporting companies first registered on or after January 1, 2024, must file an initial BOI report within 90 calendar days after receiving notice of the company’s creation or registration.
- New companies created or first registered on or after January 1, 2025 - Have 30 calendar days after receiving notice of the company’s creation or registration to file an initial BOI report.
In addition, if there is any change to the information provided about the reporting company or its beneficial owners, including who they are, the reporting company must file an updated BOI report with FinCEN within 30 calendar days of the change. Likewise, if any of the information filed is inaccurate, a corrected BOI report must be filed within 30 calendar days of when the company became aware of, or should have become aware of, the inaccuracy.
To navigate these compliance complexities, several steps are required:
- Determine if an entity qualifies for an exemption
- Verify business entity data
- Determine ownership
- Gather and safely store sensitive beneficial owner information
- Obtain a FinCEN ID (optional and can be for an individual, an entity, or both)
- Monitor for entity and ownership changes and file an updated report with FinCEN
Updating governing agreements and ensuring confidentiality in BOI reporting
Existing documents, agreements and templates governing joint ventures should be updated to disclose the party responsible for ensuring joint venture entity compliance with the CTA. You should also establish a way to provide filed BOI reports to the other parties in the joint venture. Because these details include sensitive information about beneficial owners – including legal name, date of birth, residential address, and the number from their driver's license, state or local ID, or passport, and an image of the document – you must make certain the process is confidential.
To simplify the reporting process and limit the sharing of sensitive information with FinCEN, you may want to recommend that beneficial owners obtain a FinCEN ID. However, make sure you tell them about their responsibility to update FinCEN with any changes in their reported information.
Furthermore, an entity management platform can help streamline this process and ensure compliance by unifying data into a single source of truth.
Termination of a joint venture and the Corporate Transparency Act
When a joint venture is terminated, typically through a partner buyout, termination conditions in the joint venture agreement should stipulate how the transaction plays out. If there is a change in beneficial ownership or any other information reported about the company or its beneficial owners during this process, you must file an updated BOI report.
Be sure to develop and document the termination process whether it involves dissolution, sale, or spinoff. Dissolution requires filings and withdrawals, obtaining tax clearances, filing annual reports, and cancelling business licenses and DBA names. For a sale or spinoff, it is essential to file amendments and submit updated BOI reports to ensure compliance.
Lastly, FinCEN requires any domestic reporting company that existed for a period of time on or after January 1, 2024, and any foreign reporting company registered in the U.S. for a period of time on or after January 1, 2024, to file an initial BOI report, even if it dissolves or terminates or ceases to be registered in the U.S. before the initial report was due.
Others in the series:
Corporate Transparency Act: Best practices for beneficial ownership information reporting
Corporate Transparency Act: Ongoing compliance for reporting companies
Corporate Transparency Act implications for bankruptcy cases
Learn more
Act now to ensure CTA compliance in joint ventures. CT’s secure and automated Beneficial Ownership Information (BOI) solution streamlines the compliance process and reduces filing times and errors. Get organized, save time, and file today!