The federal Corporate Transparency Act (CTA) will be in effect as of January 1, 2024. More than 32 million registered businesses in the U.S. will be subject to this law. If yours is one of them, continue reading to discover what you need to do.
 
If you’ve not seen previous posts or articles, the purpose of this new regulation is to combat money laundering, human and drug trafficking, terrorism financing and other illegal activities by requiring business entities to disclose information about the individuals who beneficially own and control them to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
 
As a business owner, here are your next steps:
 
1. Determine whether your company qualifies as a Reporting Company. 

Any corporation, limited liability company, or similar entity which is created by filing with a secretary of state (or similar office, such as the Arizona Corporation Commission) or is formed in a foreign country and registered to do business in the United States is considered a Reporting Company. A Reporting Company will have to submit the following information:

• Full legal name of the reporting company (and any trade names or DBAs);
• Tax identification number;
• Jurisdiction of formation; and
• Current U.S. address.

2. Determine if an exemption applies. 

Certain entities are exempt from filing:

• Companies (i) employing more than 20 full-time employees in the United States, (ii) operating from a physical office in the United States, AND (iii) having more than $5 million in gross receipts/sales, as shown on its most recent tax return
• Federally registered entities such as banks, credit unions, investment advisors, securities broker dealers, insurance companies, accounting firms, and public utilities
• Tax-exempt entities if registered with the IRS
• Publicly traded companies that are subject to SEC regulations
• Additional exceptions apply to certain entities, such as trusts, that do not require the filing with a government agency

3. Determine the Company’s Beneficial Owners.

A Beneficial Owner is defined as any individual who either (i) directly or indirectly exercises substantial control over an entity, or (ii) owns or controls at least 25% of the ownership interest in the company. Substantial Control can include individuals who are senior officers, those who have authority over the appointment of officers or board members, or those who have significant influence over important decisions and matters affecting the Reporting Company. Ownership Interest can include shares or membership interests, or any other documentation that establishes a level of ownership in the entity.
 
If your entity was created many years ago, it’s likely that there have been changes to the owner’s names and addresses, and possibly some ownership interests have changed hands through sales or inheritance. Start now to identify the current Beneficial Owners and collect the information listed below.
 
4. If your entity is created in 2024 or later, determine the Company Applicant. 

This is the person who files the document that forms the entity and/or the person who directs or controls the filing of the document. This can be an individual at your company, at your attorney or accountant’s office, or a third-party registration company.
 
5. Obtain information on Beneficial Owners (and Company Applicants, if applicable). 

For each Beneficial Owner or Company Applicant, the following information must be reported:

• Name, date of birth, and street address; and
• Government-issued identifying document, such as a passport or driver’s license and an image of that document

6. Apply for FinCEN identifiers when possible.  

A FinCEN identifier allows a Beneficial Owner or Company Applicant to enter their information directly with FinCEN, rather than providing their personal information to the Reporting Company. If the Reporting Company collects this information, it will be responsible for safeguarding the information and for updating it with FinCEN when there are changes. If the individual applies for a FinCEN identifier, the individual will be responsible for any updates and the Company does not have to create any process for securing the information. 
 
7. Submit Initial Filing on or after January 1, 2024. 

The Beneficial Owner Secure System (BOSS) will be available on January 1, 2024 for Reporting Companies to complete their Beneficial Owner Information (BOI) reports. If your company was formed before this date, you have until December 31, 2024 to file your BOI report.  If your company is formed in 2024, you have 90 days from the date of formation to file your BOI reports.  If your company is formed on or after January 1, 2025, you have 30 days from the date of formation to file your BOI reports. The BOI report will likely not be available to you after submission, so be sure to save your filing as a PDF so that you can reference the information later.
 
8. Submit Updated Filings.

If any of the information previously reported to FinCEN changes, the Reporting Company has 30 days to file an updated report. If the Reporting Company submitted inaccurate information, a corrected report must be filed within 30 days of the date it knew, or should have known, that the information was inaccurate.
 
Beware of Penalties.

It is unlawful for any person to willfully provide, or attempt to provide, false or fraudulent BOI, or to willfully fail to report complete or updated BOI. Such willful actions constitute federal crimes subject to civil and criminal prosecution, including civil fines of up to $500 per day and criminal penalties of a $10,000 fine and imprisonment up to two years.
 
Final Thoughts.

These obligations are new to many business owners in the U.S. Take the time now to review the required steps, to determine who your company’s Beneficial Owners are, and to make a plan for obtaining the needed information. The CTA forms are not yet available, so work now to address any issues prior to January 1, 2024 so that you can timely file your BOI report. Please contact me if I can be of assistance.

NOTE: THIS ARTICLE IS FOR GENERAL INFORMATIONAL PURPOSES. IT DOES NOT CONSTITUTE LEGAL ADVICE, NOR DOES IT CREATE AN ATTORNEY-CLIENT RELATIONSHIP. EACH SITUATION IS DIFFERENT. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE YOUR LEGAL RIGHTS, REMEDIES, AND DUTIES.

By Wendy M. Anderson, Esq.
Law Office of Wendy Anderson, PLLC

480-825-4509Contact Me Today