You have likely heard as a business owner that on January 1, 2024, there is a new reporting obligation that goes into effect that applies to many business owners nationwide. This report was put into effect by the Financial Crimes Enforcement Network (also known as FinCEN), which is a bureau of the US. Department of Treasury. The report is officially named the “Beneficial Ownership Information (BOI)” Report and is the response to the new Corporate Transparency Act. The Corporate Transparency Act was created by Congress in collaboration with FinCEN to issue a regulation providing the details of who must file a report, when it must be filed, and what information must be reported.
It is important for EVERY business owner to know whether this report applies to you or not, as failure to comply results in some pretty steep penalties. Let’s stay ahead of the game and dive into the details you as a business owner need to know.
The Corporate Transparency Act (CTA) is primarily an anti-money laundering law. You will see that inside the fine print of the law, Congress states that there are those who seek to conceal their ownership of corporations, LLCs, or similar entities in the United States to facilitate money laundering, financing of terrorism, tax fraud, and other illegal acts. Congress seeks to create federal laws to provide for the collection of beneficial ownership information to protect national interests and better enable efforts to counter anything illegal.
Every corporation, LLC, or other entity created by the filing of a document with a Secretary of State or similar office under the law of a state or Indian tribe is required to file a BOI report unless it qualifies for an exemption. The entities that are created in the United States and not exempt, and therefore required to file a BOI report, are called “domestic reporting companies”. There are also certain entities that are formed in foreign countries and registered to do business in the United States that will also be required to file a BOI report and are called “foreign reporting companies.”
Let’s take a look…there are 23 categories of entities that are exempt from filing a BOI report. Upon viewing the list, you will see that most of the exempted entities are already subject to substantial federal or state regulation. Some examples of exempt entities are publicly traded companies and other entities that file reports with the SEC, banks, credit unions, money service businesses, securities brokers and dealers, tax-exempt entities, insurance companies, state-licensed insurance producers, pooled investment vehicles, public utilities, and accounting firms.
One other large exemption is for what’s known as a “large operating company”. A “large operating company” is an entity that:
If your company falls under the “domestic reporting company” category as outlined above AND was created before January 1, 2024, you will need to provide information about the company and about its beneficial owners. If your company is to be created on or after January 1, 2024, you will need to provide information about the company, its beneficial owners, and its company applicants. Furthermore, your company will be required to provide:
Since the terms beneficial owner and company applicants are the primary focus of this new legislature…let’s dive into the definitions of those two groups:
A beneficial owner is an individual who, directly or indirectly, either exercises substantial control over the reporting company or owns or controls at least 25 percent of its ownership interests. There may be one or more than one beneficial owner.
A company applicant is the individual who directly files the document that creates the domestic reporting company and the individual who is primarily responsible for directing or controlling the filing if more than one individual is involved in the filing of the document.
You will need to submit the following information for each beneficial owner and applicant of your company.
A domestic reporting company created before January 1, 2024, must file its BOI report before January 1, 2025.
A domestic reporting company created between January 1, 2024, and January 1, 2025, must file a BOI report within 90 days of receiving the public notice that its creation has become effective.
A domestic reporting company created on or after January 1, 2025, must file a report within 30 days of the public notice of its creation being effective.
The Financial Crimes Enforcement Network (FinCEN) is authorized to disclose BOI to a limited group of requestors including:
If you are an owner or manager of a small business, you should begin to determine now whether your business is a reporting company or whether one of the 23 exemptions applies to you. If you are a reporting company, you will want to decide when you will want to file your BOI report. You should gather the information listed above for all applicable parties and ensure that it is current when you decide to complete the filing process. You also should consider implementing a system to keep track of the necessary information to ensure accurate and current information is always available if updates need to be filed.
Be proactive. Do you feel your business meets the filing requirements for the Corporate Transparency Act, but you simply don’t have time to take on another task? We can help. Sparks Law is ready to facilitate the preparation and filing process of the Corporate Transparency Act for your business starting NOW. Rather than hassling with all the confusing paperwork and legal jargon, let an experienced business law team handle all the legalities on your behalf. Sparks Law will ensure priority filing effective January 1, 2024, for an introductory rate of $450.00 (this is inclusive of all associated fees). This special rate is being offered through December 31st, 2023 ONLY! Rates are subject to change for filings requested and performed after January 1, 2024.
NOTE: FinCEN has not permitted access to the filing portal until 01/01/2024. You are paying now to ensure priority filing services effective 01/01/2024.
You will need to file another report within 30 calendar days from which the change occurs. This would also be the case for a company that changes from being a reporting company to one eligible for an exemption. There are no requirements for a reporting company to update information about the company applicant.
If an inaccuracy is determined in the initial BOI report, a corrected report must be filed within 30 calendar days after the reporting company becomes aware of the inaccuracy.
No. Reports will be filed electronically through the FinCEN website’s system.
No, the FinCEN database will not open to accepting BOI reports until 01/01/2024.
Yes. Individuals can apply to FinCEN for a unique number called a FinCEN identifier. They must file an application with FinCEN containing all the required information. The individual can provide the FinCEN Identifier to the reporting company, which can then include the FinCEN Identifier on their BOI report. An individual obtaining a FinCEN Identifier will have to file an updated application within 30 days of any change in the required information.
Please view the FinCEN’s website for more information on the Corporate Transparency Act.