If you operate a corporation, LLC, LLP, or business trust anywhere in the U.S. or its territories, it’s time for transparency.
As of January 1, 2024, the Corporate Transparency Act (CTA) requires all entities formed or registered to do business in the U.S. to file Beneficial Ownership Information (BOI) to the U.S. Treasury’s Financial Crimes and Enforcement Network (FinCEN).
Enacted as part of the Anti-Money Laundering Act of 2020, the CTA requires certain companies, typically smaller and otherwise unregulated companies, to file BOI identifying those individuals who own and control the company. This information can then be disclosed by FinCEN to certain specified government authorities and financial institutions in an effort to combat money laundering, tax fraud, terrorist funding, and other illicit activities.
“Reporting companies” include all U.S. entities formed or registered to do business by filing with a secretary of state or similar office. Required information includes the entity’s full name, any trade or d/b/a name, its principal address, its jurisdiction of formation or registration, and its tax ID number.
“Beneficial owners” are those who directly or indirectly exercises substantial control over the reporting company; has the ability to make important decisions on behalf of the reporting company; owns or controls 25% or more of the ownership interests of the reporting company, including of convertible interests irrespective of whether these convertible interests are debt or equity, along with directly held options and warrants; or who acts as an intermediary, custodian or agent on behalf of another, including certain trust. Beneficial owners also include trustees and beneficiaries of trusts, if the beneficial owner is a trust.
The CTA also requires reporting companies to provide identifying information for the “company applicants” of the reporting company, or the individual responsible for filing or directing the filing of formation documents. This may include legal counsel.
There are 23 specified exemptions, mostly for entities already subject to heavy regulation under which their BOI may already be recorded, as well as publicly registered entities, non-profit 501(c)s, and certain tax-exempt entities.
When must you submit your initial BOI report? If the reporting company was formed before January 1, 2024, it has until January 1, 2025, to submit its initial BOI report. New entities formed on or after January 1, 2024, must file their initial BOI within 90 calendar days of receiving actual or public notice that its creation or registration is effective. Reporting companies formed on or after January 1, 2025, must file an initial report within 30 calendar days. Other rules apply.
Willfully providing false or incomplete information, or neglecting to update information, can result in penalties of up to $10,000 in fines and up to two years imprisonment. Notably, individuals may also be held liable if they were responsible for the failure or held a senior position at the time of the failure. Information continues to be forthcoming based on ongoing judicial decisions. Consult with your tax or legal counsel for the latest advice.
Marianna Seiler DeJager
A director at Broward-based Tripp Scott law firm, Seiler DeJager focuses her practice in the areas of corporate transactions, entrepreneurial business, and general business services.
Tripp Scott, P.A. has prepared materials to assist its clients in this new reporting requirement. For a more comprehensive understanding of the CTA, contact Tripp Scott.