Publication

25 July 2024

Navigating the Corporate Transparency Act: FinCEN’s Guidance on Dissolved Entities

The Financial Crimes Enforcement Network (FinCEN) has recently issued detailed guidance on the reporting obligations for dissolved entities under the Corporate Transparency Act (CTA). This update clarifies the Beneficial Ownership Information (BOI) reporting requirements for entities that have ceased to exist after January 1, 2024, significantly impacting how businesses handle their compliance obligations under the CTA.

Background on the CTA
The Corporate Transparency Act, effective January 1, 2024, mandates that certain U.S. legal entities and foreign entities formed or conducting business in the United States disclose their beneficial ownership information to FinCEN. The primary goal is to enhance transparency and combat illicit activities such as money laundering and fraud by providing law enforcement with critical information about the individuals who own or control these entities.

Reporting Obligations for Dissolved Entities
In a recent round of FAQs, FinCEN has clarified this confusion by stating any entity that existed as a legal entity on or after January 1, 2024, must file a BOI report, even if it has since been dissolved. This requirement applies regardless of whether the dissolution occurred before the entity’s initial BOI report was due. Entities which ceased to exist before January 1, 2024, are exempt from reporting requirements.

Criteria for “Ceasing to Exist”
FinCEN emphasizes that the determination of whether an entity has ceased to exist is subject to the laws of the jurisdiction where it was formed. Key indicators of dissolution would include:

  • Filing dissolution paperwork with the relevant jurisdiction.
  • Receiving confirmation of dissolution.
  • Paying any required taxes or fees.
  • Winding up all affairs, such as liquidating assets and closing bank accounts.

Entities that are administratively dissolved or suspended do not cease to exist unless the dissolution or suspension is permanent.

Practical Implications and Compliance
This expanded reporting requirement presents several challenges. Entities that dissolve must still ensure compliance with BOI reporting, potentially requiring former officers, directors, or managers to take responsibility for filing. Additionally, determining the exact BOI at the moment of dissolution can be complex, especially if the entity has undergone significant changes during its winding-up process. As a result, businesses must carefully manage their dissolution processes to ensure full compliance with the CTA’s requirements.

Conclusion
As FinCEN continues to refine its guidance on the CTA, businesses must stay informed and proactive in their compliance efforts. Entities planning to dissolve or those that have recently dissolved must review their obligations under the new guidance to avoid potential penalties and ensure that they meet all reporting requirements. This latest update underscores the importance of meticulous planning and thorough documentation in corporate dissolution processes.

Please contact your Miller Johnson attorney or any one of the Miller Johnson CTA task force members listed to to the left if you have questions about this alert.