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CORPORATE TRANSPARENCY ACT
INFORMATION FOR ALL CORPORATIONS, LLC’S and PARTNERSHIPS
This contains general information regarding a very important filing requirement which may be imposed upon you as of January 1, 2024, by the Corporate Transparency Act (“CTA”). Unless an exemption applies, the CTA mandates that all entities that are either created by filing a document with the Secretary of State or a similar office, or a foreign entity that is registered to conduct business within the United States (a “Reporting Company”) are required to file a report with the U.S. Treasury’s Financial Crimes and Enforcement Network (“FinCEN”) which includes information regarding the Reporting Company itself, its “Beneficial Owners” and in certain instances its “Company Applicants”. The Penalties are substantial for not complying.
The purpose which underlies the perceived need for the CTA is to expand the U.S. Government’s collection of data regarding business entities in order to combat money laundering and terrorism. The collected data will be held by FinCEN in a secure national database called the Beneficial Ownership Secure System (“BOSS”) and that data will only be made available to certain law enforcement agencies, taxing authorities and a limited number of other potential users for specified purposes, upon request. It is estimated 33 million entities will need to file a Beneficial Ownership Information Report (“BOI Report”) with FinCEN.
There follows a summary of the key points regarding the CTA of which you should be aware:
1. The Reporting Company — Unless an exemption applies, every entity — a U.S. corporation, LLC’s (including single member, disregarded entity LLC’s), partnerships, business trusts/statutory trusts, and foreign entities that have registered to conduct business within the United States are a Reporting Company and it will need to file a BOI Report.
2. “Specified Exempt Entities” — There are 23 “CTA Exempt Entities” of which 19 of the CTA Exempt Entities” are declared exempt in the final regulations as “Specified Exempt Entities”. One of the Specified Exempt Entities is that of the Large Operating Company which must have: (i) at least 20 full-time employees in the United States; and (ii) at least $5 M in annual gross receipts. Other Specified Exempt Entities include certain nonprofit corporations, certain licensed insurance companies, financial service institutions, and wholly-owned subsidiaries of Large Operating Companies.
3.The BOI Report – The BOI Report commences with detailed information regarding the Reporting Company including its full name, business address (a street address, not a P.O. Box), state of formation, EIN, and specific details regarding each “Beneficial Owner” including the name, date of birth, address, and an identifying document number from either a non-expired driver’s license or passport that can be scanned and included in the BOI Report. In certain instances the “Company Applicant” will also need to register. The entire BOI Report will be filed online with FinCEN.
4. Beneficial Owner — A Beneficial Owner is any individual who directly or indirectly: (i) exercises substantial control over the entity (e.g., a LLC Manager, corporate officer, etc.) or (ii) owns twenty-five percent (25%) or more of the ownership interests in the Reporting Company. Individuals within a trust structure, holding a fiduciary position (e.g., a Trustee or a Trust Protector) within that trust structure, may also be considered to be a Beneficial Owner.
5. Due Dates for the BOI Report — Reporting Companies formed prior to January 1, 2024 will have until January 1, 2025 to file a BOI Report. Reporting Companies formed after January 1, 2024, will have ninety (90) days to file a BOI Report. In addition to the initial filing requirement, if any changes in the report occur, the Reporting Company has thirty (30) days to file an updated report.
6. Company Applicant — Reporting Companies formed after January 1, 2024, will be required to identify and include in its BOI Report at least one “Company Applicant”, and at the most two. In the first instance, the party who directly filed the document that created the Reporting Company will need to be the Company Applicant. Another possible Company Applicant is the individual who was primarily responsible for directing or controlling the filing of the document that created the Reporting Company.
7. The Penalties — There exist civil penalties in the amount of $500 for each day the CTA violation continues to occur and criminal penalties of up to $10,000 and imprisonment for up to two (2) years.
You may choose to file your BOI Reports on line at www.fincen.gov/boi or you may contact us if you have questions or would like assistance.
