Corporate Transparency Act update

By Leisa Boley Hellwarth

I try to avoid repeating a topic, unless there is a new development. This column is an exception. The Mid-January 2024 column discussed the new Corporate Transparency Act, also known as Beneficial Ownership Information Reporting. This law mandates that all limited liability companies and corporations, created or registered before Jan. 1, 2024, must report their beneficial owners to the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) by January 1, 2025. That means the deadline is a little over three months away.

Filing is online at www.fincen.gov/boi. There is no charge. It should take less than ten minutes to complete.

Several of the social media sites have posted tutorials going through the steps to properly file. Find these using the search button for the site you prefer.

What will a reporting company have to disclose about itself? (1) its legal name; (2) any trade names such as d/b/a; (3) the current street address of its principal place of business; (4) its jurisdiction of formation; and (5) its Taxpayer Identification Number.

Who is a beneficial owner? An individual who either directly or indirectly: (1) exercises substantial control over the reporting company; or (2) owns or controls at least 25% of the reporting company’s ownership interests.

What will a reporting company have to disclose about beneficial owners? (1) the individual’s name; (2) date of birth; (3) residential address; (4) an identifying number from an acceptable identification document such as a passport or US driver’s license, and the name of the issuing state or jurisdiction of the identification document. In addition, an image of the identification document will need to be submitted.

What companies are exempt? The are 23 types of entities exempt from the Beneficial Ownership Information Reporting requirements. These entities include publicly traded companies meeting specified requirements, many nonprofits and certain large operating companies. It appears that most limited liability companies and corporations that are agricultural are not exempt.

What else will need to be reported? It all depends on when the company was created or registered. If a reporting company is created or registered on or after Jan. 1, 2024, the reporting company will need to report information about itself, as described above, its beneficial owners, as described above, and its company applicants. If a reporting company was created or registered before January 1, 2024, the reporting company only needs to provide information about itself and its beneficial owners. The reporting company need not provide information about its company applicants.

Who is a company applicant of a reporting company? A company that must report its company applicants will have up to two individuals who could qualify as the company applicant: (1) the individual who directly files the documents that creates or registers the company; and (2) if more than 1 person is involved in the filing the individual who is primarily responsible for directing or controlling the filing.

What are the penalties for non-compliance? As specified in the Corporate Transparency Act, a person who willfully violates the beneficial operating interest 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.

There is an official website for the Corporate Transparency Act at www.FinCEN.gov/BOI that provides lots of useful information, including a Small Entity Compliance Guide.

Happy reporting! And file your report sooner rather than later…