What New Federal Reporting Requirements Mean for Construction BusinessesWhat New Federal Reporting Requirements Mean for Construction Businesses

The Corporate Transparency Act took effect earlier this year, and most companies—including contractors—are required to complete a Beneficial Ownership Information report and submit it to the Financial Crimes Enforcement Network by Jan. 1. Here’s what you need to know to make sure your construction firm complies. 

These reports provide information about a company’s “beneficial owners” and must only be submitted once per company. A beneficial owner refers to someone with substantial control over the company or who has a considerable interest (at least 25%) in the business. 

But what about companies formed in 2024 but then close quickly? Unfortunately, this does happen, especially in the case of small businesses like many contracting firms. Overall, one in four businesses fail during their first year, according to the U.S. Bureau of Labor Statistics. 

On July 8, FinCEN published an FAQ document with guidance for companies to which this applies. 

What the Requirement States 

It may be surprising to learn that if you create a company in 2024 but close operations before the filing deadline, you must still submit a BOI report. Otherwise, you will be considered noncompliant and can face criminal and civil penalties, such as fines or even imprisonment. 

According to FinCEN’s site, BOI reports must be filed “within 90 days of receiving actual or public notice of creation or registration.” This changes for companies to be created or registered in 2025 or later, which will need to report their beneficial ownership information to FinCEN “within 30 days of receiving actual or public notice of creation or registration.”  

However, according to FinCEN, “if a reporting company files an initial beneficial ownership information report and then ceases to exist, then there is no requirement for the reporting company to file an additional report with FinCEN noting that the company has ceased to exist.” 

It’s also important to note that companies shuttered before Jan. 1, 2024, are not required to file a report. 

Which Companies Are Required to Report 

Most businesses incorporated or registered to operate in a state must provide details about their officers, owners and other significant stakeholders, according to FinCEN. Almost every small business is required to report this information. These include primarily limited liability partnerships, limited liability companies, limited liability limited partnerships and business trusts. Single-owner LLCs must report as well, but sole proprietors not registered as LLCs are not mandated. 

Many larger companies operating in highly regulated industries are subject to other requirements, so they are not required to complete the CTA reporting. These are included in 23 categories, such as bank holding companies and savings and loan holding companies, financial market utilities, banks, public utilities, domestic credit unions and large operating companies.  

What Information Must Be Submitted 

Businesses not exempt from the CTA must submit information including the following:  

A “beneficial owner” refers to someone with substantial control over the company or who has a considerable interest (at least 25%) in the company. 

The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.