Beginning January 1, 2024, and pursuant to a new federal law known as the Corporate Transparency Act (CTA), many companies will be required to report information to the U.S. government about their beneficial owners (i.e., the individuals who ultimately own and control the company). These companies will have to report the information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. The CTA, passed by Congress in 2021, creates a new beneficial ownership information reporting requirement as part of the U.S. government’s efforts to make it harder for bad actors to hide their identities and launder money through shell companies or other opaque ownership structures.
FinCEN has published information about the CTA and guidance for businesses regarding the reporting requirements here. FinCEN has also issued a Small Entity Compliance Guide to help companies determine whether the CTA applies and what information must be reported.
Be aware, FinCEN has been notified of fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the CTA. The fraudulent correspondence may be titled “Important Compliance Notice” and asks the recipient to click on a URL or to scan a QR code. Those emails or letters are fraudulent. FinCEN does not send unsolicited requests. Please do not respond to these fraudulent messages or click on any links or scan any QR codes within them.
Do you have to report?
Under the CTA, “reporting companies” are required to report beneficial ownership information. Your company may be a reporting company and you may need to report information about your company’s beneficial owners if your company is:
- A corporation, a limited liability company, or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe; or
- A foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing.
Some companies may qualify from an exemption. Exemptions include:
a. Publicly traded organizations
b. Large businesses, as defined by the statute
c. Banks, bank holding companies, and federal or state credit unions
d. Investment companies
e. Public utilities
f. Insurance companies
g. Tax-exempt organizations
h. Inactive businesses
What information are you required to report under the CTA?
A reporting company formed before or after January 1, 2024, must file identifying information of:
- the reporting company, including the legal name, address, registered jurisdiction, and federal tax ID number; and
- the beneficial owners of the reporting company, including owners with substantial control, as defined in the statute, and/or those who own 25% or more of the reporting company.
A reporting company formed after January 1, 2024, must also report identifying information of the reporting “company applicants.” Individuals are company applicants if either of the following are met (and each company may have two individuals who must report):
- The individual who directly files the document that creates or registers the company; and
- If more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing.
When do you need to provide the required information to FinCEN?
Reports will be accepted starting on January 1, 2024.
- If your company was created or registered prior to January 1, 2024, you will have until January 1, 2025, to report the required information.
- If your company was created or registered on or after January 1, 2024, and before January 1, 2025, you must report the required information within 90 calendar days after receiving actual or public notice that your company’s creation or registration is effective, whichever is earlier.
- If your company was created or registered on or after January 1, 2025, you must file the report within 30 calendar days after receiving actual or public notice that its creation or registration is effective.
- Any updates or corrections to beneficial ownership information that you previously filed with FinCEN must be submitted within 30 days.
How do you file the report?
You will have to report beneficial ownership information electronically through FinCEN’s website: www.fincen.gov/boi. The system will provide you with a confirmation of receipt once a completed report is filed with FinCEN. There will be no fee for submitting your beneficial ownership information report to FinCEN.
The form to report beneficial ownership information is not yet available. Once available, information about the form will be posted here.
What are the penalties for noncompliance?
Failure to comply with the CTA can result in civil or criminal penalties and may include fines up to $10,000 and imprisonment up to two years. However, if you correct a mistake or omission within 90 days of the deadline for the original report, you may avoid being penalized.
Companies with further questions about this new rule and the actions necessary to address it should contact Dunlap & Seeger P.A. at (507) 288-9111 or email@example.com.