01/16/2024
Many of you may have seen advisories about the need to file information regarding the ownership of your various entities under the new “Corporate Transparency Act.” This may seem counter-intuitive to many of you or seem like a “phishing” expedition.
The filing requirement is very real and the consequences of not filing can be expensive.
So, corporations, LLC’s, LP’s (except for entities which already report ownership info- like public companies) must file and report ownership information. There is an exemption for an entity that employs more than 20 full-time employees and has more than $5 Million in gross receipts and has a physical office in the United States.
Beneficial Owners” must be reported.
• A beneficial owner of a reporting company is an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise (i) exercises substantial control over the entity; or (ii) owns or controls at least 25% of the equity interests of the entity.
• “Substantial control” encompasses individuals who (i) serve as a senior officer of the reporting company, (ii) have appointment or removal authority over the senior officers and board of directors, (iii) can direct, determine, or have substantial influence over important decisions within the company, and (iv) have any other type of substantial control over the company.
What Must Companies Report?
• Reporting companies subject to the CTA are required to provide the following information regarding the entity: (i) full legal name; (ii) trade names or d/b/a names; (iii) address of the entity; (iv) the jurisdiction of formation or registration; and (5) the federal taxpayer identification number.
• For each beneficial owner, the reporting company must provide the following: (i) full legal name; (ii) birthdate; (iii) home address; (iv) an identifying number from a driver’s license, passport, or other approved documents; and (v) an image of the approved document that contains the identifying number. In lieu of (iv) and (v), an individual can apply for a FinCEN identifier number, after which the individual is permitted to use the identifier number on subsequent filings.
When Must Companies Report?
• Existing reporting companies that were formed before January 1, 2024, must file their initial reports no later than January 1, 2025. Newly formed reporting companies created after January 1, 2024, must file their initial reports 90 days after receiving notice of their creation or registration.
• After the initial filing, there is no annual or quarterly filing requirement; however, reporting companies have 30 days to amend their report to include updated information. Additionally, reporting companies must correct inaccurate information previously filed within 30 days of discovering the error.
• If a company is required to report its beneficial ownership information to FinCEN, the company will do so electronically through a secure filing system available via FinCEN’s website. The FinCEN BOI E-Filing System is now up and running on FinCEN’s website https://boiefiling.fincen.gov/.
Penalties for Violating the CTA
• Any person who provides false information or fails to comply with reporting requirements is liable for civil penalties of no more than US$500 for each day that the violation continue. Violators are also subject to criminal penalties of imprisonment of up to two years and fines of up to US$10,000.
These filings can be done on-line, and the process is fairly easy once you gather the required data.
