Corporate Transparency Act – Beneficial Ownership Information Reporting Requirement
Dear Colleagues
I assume you are aware of the Beneficial Ownership filing requirement, so please forgive me for advising you of something about which you already know. But, in the remote chance that you are unaware or have not acted on behalf of your clients, please read below.
Beginning January 1, 2024, for an owner of at least 25% of a corporation, LLC, PLLC, or certain other entities, or for an individual who exercises “substantial control” of such an entity, the Corporate Transparency Act (“CTA”) deems such persons as “Beneficial Owners” and requires the filing of a Beneficial Ownership Interest (“BOI”) Report – not with IRS, but with the Financial Crimes Enforcement Network (FinCEN). For a Beneficial Owner of multiple entities, a BOI report is required for each entity.
The intent of the BOI reporting requirement is to help U.S. law enforcement combat money laundering, the financing of terrorism and other illicit activity.
Failure to file could result in severe financial penalties as well as criminal prosecution.
What entities are required to comply with the CTA’s BOI reporting requirement.
Domestic companies required to report include: corporations, LLCs, PLLCs, or any entity created by the filing of a document with a state secretary of state or similar office, or Indian tribe. Certain foreign entities registered to do business here may also be required to report.
Are there any exemptions from the filing requirements?
I am advised that there are currently 23 categories of exemptions, including, for example, not-for-profits. That said, please note that while not-for-profits are exempt, I have been advised that even though an entity may have been set up as a not-for-profit on the state level, until it receives IRS not-for-profit approval, it is not exempt from filing.
In addition, certain “large operating entities” are exempt. Such entities must satisfy a certain number of U.S. employees, gross revenue amounts, and must be physically present in the U.S.
Some dissolved or inactive entities may also be exempt.
Notwithstanding the foregoing, do NOT assume an entity is exempt from filing.
When must companies file?
New entities are those created/registered after December 31, 2023. They must file within 90 days after creation.
Existing entities are those created/registered before January 1, 2024. They must file by January 1, 2025.
Reporting companies that have changes to previously reported information, or discover inaccuracies in previously filed reports, must file again.
What sort of information is required to be reported?
Company name, EI#, location, Beneficial Owner name, DOB, address, cc of picture ID (passport, driver license).
For companies created after 2023, information re “Company Applicants” need also to be included. A Company Applicant is the party or parties who prepared or filed the business formation documents to legally create the entity. A Company Applicant may also be a Beneficial Owner. But, a Beneficial Owner is not necessarily a Company Applicant.
Penalties for not filing a BOI report.
Penalties for willfully not complying with the BOI reporting requirement can result in civil penalties of up to $591 per day, and criminal penalties of up to $10,000 with up to 2 years in prison. Who knows how aggressive FinCEN will be regarding penalties for non-filing or late filing. But it would be foolhardy to test that. I do not do FinCEN reporting work. This is just a head’s up that this filing requirement now exists. If you have already filed with FinCEN, &/or had your clients file, please disregard this notice.
There are numerous individual & companies that offer their services to do the BOI filing. The federal government does NOT charge any fee for filing a BOI report. However, those individuals or companies who do the prep & filings will usually charge a fee for their services.
