The Corporate Transparency Act that went into effect on January 1 of this year (the “CTA”) that requires owners of companies to report their beneficial ownership information to the federal government, specifically the Financial Crimes Enforcement Network (“FinCEN”), a part of the Treasury Department.  If you have over 25% ownership in a company, it is very likely that you will need to comply with this requirement and report information about the owners of your company to FinCEN. Please be aware that existing companies have until January 1, 2025 to file and companies formed in 2024 have 90 days from formation date to file. 

Most companies will be able to complete these steps themselves, but we are available to answer questions and assist with filing when necessary. The following will explain all the relevant details. 

Who Has to File? Who is Exempt?

All entities organized in the U.S., or outside of the U.S., that were created by the filing of a document with any secretary of state or that are registered with any U.S. secretary of state must file. This means all LLCs, corporations, and registered partnerships. It does not apply to trusts, unless the trust is registered with a secretary of state. If your entity is not registered with a secretary of state, you do not have to file.

In addition, there are 23 exemptions from filing requirements. These can be viewed on page 4 of the Small Entity Compliance Guide. Most of the exemptions are for financial services providers, banks, and broker-dealers. 

Importantly, there is an exemption for “large operating companies,” which means a company that (a) employs more than 20 people in the U.S., (b) has a reported gross revenue or sales of over $5M on the previous year’s tax return; and (c) is physically located in the U.S.

Note that penalties for willfully not complying with the BOI reporting requirement can result in criminal and civil penalties of $500 per day and up to $10,000 with up to two years of jail time.

Who is a Beneficial Owner?

Any individual who, directly or indirectly, either:

• Exercises “substantial control” over a reporting company, or

• Owns or controls at least 25 percent of the ownership interests of a reporting company

An individual has substantial control of a reporting company if they direct, determine or exercise substantial influence over important decisions of the reporting company. This includes any senior officers of the reporting company, regardless of formal title or if they have no ownership interest in the reporting company. Please see the Small Entity Compliance Guide for more details.

When Do You Have to File?

• Companies formed prior to 2024 must file by January 1, 2025.

• Companies formed during 2024 must file within 90 days of formation.

• Companies formed after 2024 must file within 30 days of formation.

What Information is Required?

Companies must report the following information: 

• Full name of the reporting company as well as any trade name or doing business as (DBA) name 

• Business address

• State or Tribal jurisdiction of formation, and an 

• IRS taxpayer identification number (TIN)

The following information for each beneficial owner must also be provided:

• Name

• Birthdate

• Address, and unique identifying number and issuing jurisdiction from an acceptable identification document (e.g., a driver’s license or passport) and 

• Image of such document.

A pdf containing all the questions on the application can be seen here. 

Who Has Access to this Information?

The database is maintained by FinCEN and only certain parties are authorized access to the information. The first category of BOI recipients authorized by the CTA consists of (1) Federal agencies engaged in national security, intelligence, or law enforcement activity if the requested information is for use in furtherance of such activity; and (2) State, local, and Tribal law enforcement agencies if “a court of competent jurisdiction” authorizes the law enforcement agency to seek the information in a criminal or civil investigation. 

Federal agency access to BOI would be contingent on the type of activity an agency engages in. In contrast, State, local, and Tribal access would be contingent on two conditions; (1) whether the recipient is a law enforcement agency,  i.e., the type of agency; and (2) whether a State, local, or Tribal law enforcement agency receives authorization from a court of competent jurisdiction to request BOI from FinCEN. You can see more about this here: https://www.federalregister.gov/documents/2023/12/22/2023-27973/beneficial-ownership-information-access-and-safeguards

The stated reason for the reporting requirements is to help the federal government curb combat financial crimes such as money laundering and other crimes.

How Do I File?

You can file online here: https://boiefiling.fincen.gov/fileboir.  If you have questions, please reach out to us.