Corporate Transparency Act: Beneficial Ownership Information Reporting Requirement

Published on Wednesday, January 31, 2024

Starting January 1, 2024, a significant number of businesses will be required to comply with the Corporate Transparency Act (“CTA”). The CTA was enacted into law as part of the National Defense Act for Fiscal Year 2021 to help U.S. law enforcement combat money laundering, the financing of terrorism and other illicit activity. The CTA requires disclosure of the beneficial ownership information (otherwise known as “BOI”) for people who own or control a company. This law affects new and existing companies and focuses on small and medium sized companies. The CTA reporting is not filed with the IRS. Instead it is filed electronically with the Financial Crimes Enforcement Network (FinCEN) at https://boiefiling.fincen.gov/.

What entities are required to file?

All domestic and foreign entities formed or registered in a U.S. state (or Indian tribe) will be subject to the CTA’s reporting requirements, unless they meet an exception. This will include corporations, partnerships, limited liability companies (LLCs) or any similar entity created by the filing of a document with a secretary of state or any similar office.

Who is a Beneficial Owner?

A Beneficial Owner is defined as an individual who has substantial control over the entity or owns at least 25% of the ownership interests. Substantial control is considered to be met if the individual has control of or influence on important decisions for the company. This means any shareholders, owners, CEO, and other officers that function like a CEO could be considered beneficial owners who must then be reported.

All Beneficial Owners will need to provide the following information:

• Full legal name
• Date of birth
• Current residential street address
• Identifying number from an acceptable identification document (Driver’s License, Passport, State ID Card)
• PICTURE of the identification document used above

What company information is required to be filed?

Companies must provide the following information

• Full name of the reporting company
• Any trade names or DBA’s
• Business address
• State or Tribal jurisdiction of formation
• IRS Taxpayer Identification Number (TIN)

Additionally, for companies created after January 1, 2024, the reporting company is required to report its company applicants. A company applicant is defined as the Individual who files the BOI report AND the individual who is responsible for the filing, if different. Companies in existence prior to January 1, 2024 will not be required to report its company applicants.

When must companies file?

There are different timeframes depending on when an entity is registered/formed or when there is a change to the beneficial owner’s information.

• New entities (created/registered in 2024) — must file within 90 days
• New entities (created/registered after 12/31/2024) — must file within 30 days
• Existing entities (created/registered before 1/1/24) — must file by 1/1/25
• Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports — must file within 30 days

This is NOT an annual filing. No additional filings are required until there is a change in the reported information, such as a change of address or a change in ownership. Upon a change in reported information, the company is required to file an update within 30 days, or it may incur penalties.

Are there any exemptions?

There are 23 categories of exemptions. Included in the exemptions list are publicly traded companies, banks and credit unions, securities brokers/dealers, , tax-exempt entities and certain inactive entities, among others. Please note these are not blanket exemptions and many of these entities are already heavily regulated by the government and thus already disclose their BOI to a government authority.

Large operating entities are exempt from filing if they meet ALL of the following requirements:

1. Employ more than 20 people in the U.S.
2. Have reported gross revenue (or sales) of over $5M on the prior year’s tax return; AND
3. Be physically present in the U.S.

Risk of non-compliance?

Failure to comply with the CTA can result in civil and criminal penalties. This includes up to $500 per day that the violation continues, fines of up to $10,000 and possible imprisonment of up to two years.

Next Steps

Although this reporting may be very complex for some entities, many companies will be able to navigate this process without assistance. For other companies, some professional assistance may be required. At this time, our office is unable to provide you with that assistance as we have been advised that doing so could be considered the “unauthorized practice of law”. As such, we recommend that you seek legal counsel if you have questions about your particular reporting situation.

We appreciate our partnership with you and we will continue to monitor these requirements as more information becomes available. Additional resources can be found online at https://boiefiling.fincen.gov/help/.

Sincerely,
BA Harris Team