Top Ten Things Business Owners Should Know About the Corporate Transparency Act and Beneficial Ownership Information Reporting
A new reporting requirement will go into effect January 1, 2024 as a result of the Corporate Transparency Act enacted by Congress. Millions of small business owners will be required to file a Beneficial Ownership Information (BOI) Report with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
1. The purpose of the Corporate Transparency Act is to prevent money laundering.
a. The Corporate Transparency Act was enacted to collect beneficial ownership information needed to protect national interests and better enable efforts to counter illegal acts, such as money laundering, financing of terrorism, tax fraud, and other offenses.
2. Every corporation, LLC, or other entity created by filing a document with a Secretary of State or other similar governmental office will be required to file a report.
a. Unless an entity qualifies for an exemption, all entities that are not exempt and created in the United States must file a BOI report. The first report will be due no later than January 1, 2025 for companies created prior to January 1, 2024. All companies created on or after this date must file the report within 30 days of its creation becoming effective.
3. Certain types of entities are exempt from filing a BOI report.
a. The following types of entities will be exempt from filing a BOI report: publicly traded companies and other entities that file reports with the SEC, banks, money services businesses, credit unions, securities brokers and dealers, tax-exempt entities, insurance companies, state-licensed insurance providers, pooled investment vehicles, public utilities, and accounting firms.
4. An exemption also exists for large operating companies.
a. “Large operating companies” are defined as entities that employ more than 20 full-time United States employees, have an operating presence at a physical office in the United States, and showed more than $5 million in gross receipts or sales on a federal income tax or information return filed in the previous year.
5. Domestic reporting companies created before the January 21, 2024 date will have to report about the company’s beneficial owners. Any domestic reporting company created on or after this date will have to provide information about the company, its beneficial owners, and its company applicants.
a. The filing will have to report the company’s full legal name, any trade or “doing business as” names, its complete current street address of the business, the jurisdiction of formation, and the taxpayer identification number.
6. Beneficial owners are defined as anyone who, directly or indirectly, exercises substantial control over the reporting company or owns or controls at least 25% of its ownership interests.
a. For each of those individuals, the report will have to have their full legal name, date of birth, current street address, unique identifying number from their current governmental identifying document, such as an ID or passport, and an image from that document.
7. Company applicants are the individuals who directly file the documents that create the domestic reporting company and the individual who is responsible for directing or controlling the filing (if more than one individual is involved in the filing of the document.)
8. BOI reports and all updates and corrections will be filed electronically with FinCEN through a system that will be available on their website.
a. There will be no fee for filing these reports.
9. Individual beneficial owners or company applicants can apply for a FinCEN Identifier which will contain all required information for the BOI reports.
a. The FinCEN Identifier can be provided to the reporting company, which can then include the Identifier on their BOI report.
10. FinCEN will be authorized to disclose BOI to a limited group of requestors.
a. The following groups will be able to request BOI reports:
i. Federal agencies engaged in national security, intelligence, and law enforcement
ii. State law enforcement agencies with a court order
iii. The Treasury Department
iv. Financial institutions with the company’s consent
v. Government regulators of financial institutions
vi. Certain foreign authorities requesting information through a U.S. agency
Our offices can assist your business with preparing for these upcoming reporting requirements. These preparations will include determining whether your business will be required to file this new type of report, gathering all requested information for the FinCEN offices, and making sure all gathered information is current at the time of report filing. Should you need help with anything, please feel free to call us at 225-927-6811.
Original Information Sourced from Wolters Kluwer Article by Sandra Feldman, which can be found here: https://www.wolterskluwer.com/en/expert-insights/small-businesses-and-the-corporate-transparency-act