Starting January 1st, 2024, the Federal Corporate Transparency Act (CTA) becomes active. This law mandates that all current and new businesses registered in the United States must reveal who their owners are, whether they own the business directly or indirectly. Companies must submit this information just once to the Financial Crimes Enforcement Network (FinCEN) at the U.S. Treasury Department.
It's crucial to understand that failing to submit, submitting late, or providing incorrect information can lead to civil and criminal consequences.
Who needs to file?
Reporting companies are identified as either domestic or foreign:
• Domestic reporting companies are corporations, LLPs, or any other entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.
• Foreign reporting companies are a corporation, LLCs, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office. Sole-proprietorships that don’t use a single-member LLC are not considered a reporting company.
Reporting companies typically include:
• Limited liability partnerships
• Limited liability limited partnerships
• Business trusts
• Most limited partnerships, where entities are generally created by a filing with a secretary of state or similar office.
Exemptions include securities issuers, domestic governmental authorities, banks, and many more that don’t fall into the above categories.
When do I need to report my company’s beneficial ownership information to FinCEN?
A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report.
A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report. This 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.
Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports with FinCEN.
Beneficial owners
A beneficial owner can fall into one of two categories defined as any individual who, directly or indirectly, either:
1. Exercises substantial control over a reporting company, or
2. Owns or controls at least 25% of the ownership interests of a reporting company.
Having two categories is designed to close any loopholes and ensure all owners are identified. The key difference is that beneficial ownership is categorized as those with ownership interests reflected through capital and profit interests in the company.
Information included in the reports:
Company information reported includes:
• Legal name and all trade names or DBA (doing business as) names for the company.
• Actual street address for the company’s principal place of business (not a P.O. Box or lawyer’s or adviser’s address).
• State of formation.
• Identification number. A pass-through entity, like a single-member LLC, that may not be required to have a tax ID number may now have to obtain a unique identification number.
• An identity document from an issuing jurisdiction such as filed Articles of Incorporation or Organization, including an image of that document.
Beneficial owner reporting:
The beneficial owners must report to FinCEN their name, date of birth, home address (not P.O Box or lawyers address), and unique identifier number from a recognized issuing jurisdiction and a photo of that document. If an individual decides to file their information to FinCEN directly, they may be issued a “FinCEN identifier” which can be provided on a BOI report instead of the required information.
Company applicants
Company applicants can only be:
• The individual who directly files the document that creates the entity, or the document that first registers the entity to do business in the United States.
• The individual is primarily responsible for directing or controlling the filing of the relevant document by another.
This responsibility may fall under the scope of advisory services for an accounting professional. However, the report does not require information on the company applicant. This is an important consideration when defining the scope of engagement for advisory services with a client.
Where Do I report the form?
The form is user friendly- it can be found on the Fincen website at BOI E-FILING https://www.fincen.gov/boi
Penalties for non filers:
There will be significant penalties contemplated for non-compliance. The CTA establishes civil penalties ($500 per day, up to a total of $10,000) and criminal penalties (up to two years of imprisonment) for individuals who willfully provide false or fraudulent information in connection with a BOI report, or who otherwise willfully fail to comply with the CTA reporting requirements.
