Really? Me? Does FinCEN want me to report?
Yes, FinCEN, the Financial Crimes Enforcement Network has adopted the Corporate Transparency Act (CTA) that requires reporting by small private companies. The CTA was enacted in 2021 to require reporting of individual owners of corporate entities to FinCEN. The CTA is intended to provide additional transparency into the identity of beneficial owners of private enterprises that has historically been undisclosed. Reporting under the CTA is expected to help prevent and combat money laundering, terrorist financing, corruption, tax fraud and other illicit activity.
How do I know if I need to report under the CTA?
You are required to file a Beneficial Ownership Information (BOI) report if you are a Beneficial Owner of a Reporting Company.
You also are required to file a BOI report if you will be a “Company Applicant” for a Reporting Company that is formed or becomes a Reporting Company on or after January 1, 2024.
What is a Reporting Company?
A Reporting Company is an LLC, corporation or partnership formed pursuant to state law, other than those that are exempt from the Corporate Transparency Act (CTA) requirements. In general, all small private companies or businesses -- LLCs, corporations and partnerships formed and operating in the US -- are “Reporting Companies” unless they fit one of the exemptions from CTA requirements. The definition of Reporting Companies also includes foreign companies if they are registered to do business in the US.
Companies that are exempt from CTA reporting requirements include public reporting companies, regulated or tax-exempt entities, inactive entities, or “Large Operating Companies” (companies with >20 full-time employees in the US, operate through a physical office in the US, and file US Federal tax returns with more than $5mm in gross receipts or sales, including gross receipts or sales of affiliates and/or subsidiaries). See the chart below for the full list of exempt entities.
What is a Beneficial Owner?
A Beneficial Owners is an individual who owns or controls more than 25% of a Reporting Company, and/or an individual who exercises “substantial control” over a Reporting Company.
What is a Company Applicant?
Company Applicants are individuals who file or direct filings to form and/or register Reporting Companies.
When do I need to report by?
For existing Reporting Companies (formed prior to 1/1/24), Beneficial Ownership Information (BOI) reporting is required by January 1, 2025.
Note: for Reporting Companies formed during 2024, reporting will be required within 90 days of formation (or US registration for foreign Reporting Companies). After January 1, 2025, reporting will be required within 30 days of formation (or registration, as applicable.)
What information is included in the BOI Report?
Reporting Company Information: name, address, DBA, Tax ID number (EIN) and state or jurisdiction of formation.
Information about Individuals -- Beneficial Owners and Company Applicants: Personal information about each beneficial owner and Company Applicant (as applicable) name, DOB, home address and the ID number and a copy of an official US or state government issued ID, such as a driver’s license or a passport.
Note that Company Applicant Information is not required to be reported for Reporting Companies in existence prior to 1/1/24.
Are BOI Reports required to be made periodically?
The CTA requires that BOI Reports are updated within 30 days for any update, correction, or change.
How will reports be submitted?
CTA reporting will be through BOSS (Beneficial Ownership Secure System), an online filing system that is currently being developed by FinCEN.
How should I respond to notices that I receive about CTA reporting?
Don’t. FinCEN does not send unsolicited requests. Note that there are scammers sending fraudulent communications to individuals and entities that may be subject to the reporting requirements of the CTA. FinCEN cannot accept reports before January 1, 2024.
Who will have access to BOI Reports? Will they be public?
BOI information will not be available to the public. BOI information will be provided to Federal, state, and foreign law enforcement and regulatory agencies, pursuant to certain protocols included in the CTA. BOI may also be shared with financial services firms with consent for KYC and due diligence purposes.
What if I fit the definition of “Applicant”? Does my personal information need to reported?
No, not for Reporting Companies in existence prior to January 1, 2024, but YES, in the future, to the extent you file (or direct the filing of ) documents to create a Reporting Company beginning January 1, 2024. Individuals will be able to apply for a FinCEN ID – a unique identifying number – which will enable individuals to update or file with FinCEN without submitting their personal information again.
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THE CORPORATE TRANSPARENCY ACT: THE BASICS
| QUESTION/DEFINED TERM | SHORT ANSWER/DEFINITION | For more detail, see: |
|---|---|---|
| WHO reports? | · Domestic Reporting Company · Foreign Reporting Company |
|
| Domestic Reporting company | Any non-exempt domestic entity formed by filing with a secretary of state or similar office under the law of a State or Indian tribe. Includes corporations, LLCs, and partnerships. | 31 USC §5336 (a)(11)(A)(i) |
| Foreign Reporting company | Any non-exempt foreign entity formed under the law of a foreign country registered with a Secretary of State or similar office under the law of a State or Indian Tribe. | 31 USC §5336 (a)(11)(A)(ii) |
| What entities are exempt? | There are 23 categories of exempt entities which includes not for profit entities and entities which are regulated by a governmental regulatory body. (See below) | 31 USC §5336 (a)(11)(B) |
| WHEN is the reporting deadline for Initial report? | By January 1, 2025 for Domestic Reporting Companies and Foreign Reporting Companies existing before January 1, 2024. | 31 CFA §1010.380 (a)(1)(iii) |
| For Domestic Reporting Companies created on or after January 1, 2024 and Foreign Reporting Companies that become Foreign Reporting companies on or after January 1, 2024: within 90 days of formation.* | 31 CFA §1010.380 (a)(1)(i),(ii) *Beginning January 1, 2025, the deadline will be within 30 days of formation or registration. |
|
| What is the Required Reporting? | Beneficial Owner Information (“BOI”) | 31 USC §5336 (b) |
| What is included in the Beneficial Owner Report (BOI)? | · Full Legal Name of Reporting Company; all DBAS · Address: Complete Current Address of the Principal Place of Business (if in US); or the primary location of conducting business in the US. · US Jurisdiction of formation; or registration in the case of a foreign entity · EIN/TIN · Identify applicable Individuals o Each Beneficial Owner o Each Company Applicant - for entities created or registered on or later than January 1, 2024 - OR the fact that the Reporting Company was formed prior to 1/1/24; · Information for each Individual: o Full legal name o Date of Birth o Complete current address o Unique Government ID number from a government-issued identification document -U.S. Passport -ID -Driver’s license o Foreign Government issued passport. -Image of the document which includes the Unique Identifying Number |
31 USC §5336 (b)(2)(iv): |
| Beneficial Owner | Any individual who directly or indirectly, either exercises substantial control over such reporting company or owns or controls at least 25% of the ownership interests. Excludes: a minor child (report the information of a parent or guardian), an individual acting as a nominee, intermediary, custodian or agent of another individual, an employee whose substantial control over or economic benefits from the entity are solely derived from employment; or an individual whose interest is a future interest through right of inheritance, creditor. |
31 USC §5336 (a)(3)(A) 31 USC §5336 (a)(3)(B) |
| Substantial Control | Senior Officer, authority to appoint or remove a senior officer or the majority of the Board of Directors, directs, determines, or has substantial influence over the Reporting Company. | 31 CFR 101.380(d)(1) |
| Company Applicant | Any individual who files an application to form a Reporting Company or registers or files an application to register a foreign corporation with a US state or Tribal Territory. The individual with primary responsibility for directing or controlling filing, if more than one individual is involved. | 31 USC §5336 (a)(2) |
| Companies Exempt from CTA Reporting | · Securities reporting Issuer · Governmental Authority · Bank · Credit Union · Depositary institution holding company · Money services business · Broker or Dealer in Securities · Securities Exchange or Clearing Agency · Other Exchange Act registered entity · Investment Company or Investment Adviser · Venture Capital fund adviser · Insurance Company · State-licensed Insurance producer · Commodity Exchange Act registered entity · Accounting Firm · Public Utility · Financial market utility · Pooled investment vehicle · Tax Exempt Entity · Entity Assisting a Tax Exempt entity · Large Operating company (>20 full-time employees, operates in the US (physical office), and files a US Federal tax return with more than $5mm in sales. · Subsidiary of certain exempt entities · Inactive entity |
(a)(11)(B)(i) (a)(11)(B)(ii) (a)(11)(B)(iii) (a)(11)(B)(iv) (a)(11)(B)(v) (a)(11)(B)(vi) (a)(11)(B)(vii) (a)(11)(B)(viii) (a)(11)(B)(ix) (a)(11)(B)(x) (a)(11)(B)(xi) (a)(11)(B)(xii) (a)(11)(B)(xiii) (a)(11)(B)(xiv) (a)(11)(B)(xv) (a)(11)(B)(xvi) (a)(11)(B)(xvii) (a)(11)(B)(xviii) (a)(11)(B)(xix) (a)(11)(B)(xx) (a)(11)(B)(xxi) (a)(11)(B)(xxii) (a)(11)(B)(xxiii) |
| WHEN does my report need to be updated? | Within 30 days of the change in beneficial owner information or the discovery of an error or inaccuracy in a BOI Report previously filed. | 31 CFA §1010.380 (a)(2) |
| FinCEN Identifier | Unique identifying number assigned by FinCEN to an individual or reporting company. Reporting Companies and Individuals can apply for a FinCEN Identifier (FinCEN ID), a unique identifying number assigned by FinCEN. Individuals will be able to use their FinCEN ID in lieu of filing the personal information required and will be required to update or correct their personal information within the deadlines applicable to BOI Reports. |
31 CFA §1010.380 (a)(4) |
| How will BOI Report be filed? | Utilizing an online form, including a certification that the report or application is true, correct, and complete. https://www.fincen.gov/boi |
*Note that there is a proposed rule to extend the filing deadline for Reporting Companies formed after January 1, 2024 to within 90 days of formation.
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If you have questions about the CTA and its application to you and/or your business, the attorneys of Cohen & Buckmann can help. Contact Lauri London: lauri@cohenbuckmann.com