What is the Corporate Transparency Act?
At Givens & Larmond Law Group, we strive to provide quality, up-to-date legal services by remaining educated on the latest news and legislation that affects our clientele. We wanted to take some time to inform you of some new federal reporting requirements that may affect your business and help those who are affected remain in compliance with these new laws.
Not sure if you are affected? Read more, or take the short quiz* below to determine your compliance status.
*Please note that this quiz and guide are offered as guidance and support, not a substitute for legal advice or specific counsel
What is The Corporate Transparency Act?
The Corporate Transparency Act was passed, enacting new reporting requirements for all business conducted in the United States. Starting on January 1, 2024, all reporting companies will be required to file Beneficial Ownership Information (BOI) reports to the Financial Crimes Enforcement Network (FinCEN). Though there are some exemptions (23 to be exact), all other business entities must file these reports.
The Corporate Transparency Act (CTA) was established to help prevent individuals from facilitating illegal business operations such as tax fraud, money laundering, and terrorism financing. Hiding is a tactic widely employed by those wishing to commit these deeds, and so the CTA aims to combat these crimes by gathering more information on business operations within and connected to the United States.
What is a Reporting Company?
A reporting company is any foreign or domestic corporation, business trust, limited liability company (including LLCs, Limited liability partnerships, Limited liability limited partnerships, etc.), or other entity registered to do business in the United States through filing with a Secretary of State or any similar office of a U.S. state or tribal government. Under the CTA, all reporting companies will be required to provide information regarding the company, beneficial owners, and company applicants if applicable.
How to File the BOI Report
FinCEN has begun accepting BOI Reports as of January 1, 2024. All reporting companies registered before January 1, 2024, will have until January 1, 2025, to submit their initial BOI report. Reporting companies formed on or after January 1, 2024, will have 90 days to submit their initial BOI report. Reporting companies formed on or after January 1, 2025, will have 30 days to submit their initial BOI report.
BOI reports must be filed electronically using the beneficial ownership secure system (BOSS), created by FinCEN, available beginning January 1, 2024. Further instructions on how to file the BOI report are available on the FinCen website. (https://www.fincen.gov/boi-faqs)
Reporting Requirements
The BOI report is not an annual requirement, thus, each company is only required to file an initial BOI report. However, any changes or updates made to the previous BOI report must be submitted to FinCEN within 30 days of the change.
Who Will Have Access to the Information Filed on BOI Reports?
Federal, State, local, and Tribal officials, as well as certain foreign officials who submit a request through a U.S. Federal government agency, may obtain beneficial ownership information solely for authorized activities (i.e. national security, intelligence, and law enforcement). Financial institutions may also have access to beneficial ownership information in certain related circumstances.
Required Information
Keep reading below to learn what type of information will be required on your company’s BOI Report.
Reporting Company Information
Reporting companies will be required to provide information about the company itself as well as beneficial ownership information. Companies formed on or after January 1, 2024, will also be required to provide information about their company applicants.
Reporting companies will be required to provide the following information about the company:
- The full legal company name
- Any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names
- The address of its principal place of business within the United States.
- Entities registered outside of the U.S. will be required to list their primary address within the U.S. (a P.O. box or third-party address is not acceptable)
- The jurisdiction of formation or registration
- An IRS-issued Employer Identification Number (EIN) or Taxpayer Identification Number (TIN).
- If a foreign reporting company has not been issued a TIN, it must provide a tax identification number issued by a foreign jurisdiction and the name of the jurisdiction.
- Beneficial ownership
- Company applicants (if applicable)
Beneficial Ownership Information
A beneficial owner is an individual who exercises substantial control over the reporting company, or controls at least 25% of the reporting company’s ownership interests. An individual exercises substantial control if they fall into any of the following categories:
- A senior officer such as the President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, General Counsel, or other officer who performs a similar function.
- Has the authority to appoint or remove officers or a majority of the directors
- Makes important decisions regarding the business, finances, and structure of the company
- Has any other form of substantial control over the reporting company as defined in FinCEN’s Small Entity Compliance Guide
Reporting companies will be required to provide the following information about their beneficial owners:
- The individual’s full legal name
- Date of birth
- Current residential address
- An identifying number from a non-expired, government-issued ID, such as a passport or U.S. driver’s license, including the name of the issuing state or jurisdiction
- A copy of the government-issued photo ID or passport used to provide the identifying number
Company Applicant Information
A company applicant is an individual who files the documents to register the company. If more than one person is involved in the registration process, you must also identify the individual who is primarily responsible for directing or controlling the registration. Only companies formed on or after January 1, 2024, will be required to list their company applicants.
Reporting companies will be required to provide the following information about their company applicants:
- The individual’s full legal name
- Date of birth
- Current residential address (or business address if the company applicant is an attorney or agent)
- An identifying number from a non-expired, government-issued ID, such as a passport or U.S. driver’s license, including the name of the issuing state or jurisdiction
- A copy of the government-issued photo ID or passport used to provide the identifying number
Alternative Option: FinCEN Identifier
Individuals who do not wish to list personal information on the BOI report may obtain a FinCEN identifier. A FinCEN identifier may be used in lieu of providing the required information about the beneficial owners and/or company applicants on the BOI report. Those applying for a FinCEN identifier must provide the same information on the BOI report directly to FinCEN to obtain one. A FinCEN identifier can be requested by checking a box on the BOI reporting form.
Penalties for Non-Compliance
“As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. That person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.” – FinCEN FAQ
What Next?
Now that the online reporting system is active, and the implementation of legal requirements has begun, we recommend that your company assesses its reporting obligations, as you consider the next steps. Though not necessary, we recommend filing your company’s BOI Report with an attorney or other informed party, due to the severity of the possible penalties. Givens & Larmond Law Group are offering BOI Report filing services to our clients starting at $350.00. Use the buttons below to book your BOI Reporting service now!