Action Required - Corporate Transparency Act

Now that the Corporate Transparency Act and its required Beneficial Ownership Information reporting requirements are in place, it is time for an update.

There are new reporting requirements for many small and medium-sized businesses, which can include single-member and multi-member LLC’s, C and S corporations. You may own or operate a business required to report under the Corporate Transparency Act (CTA), and we wanted to make you aware of the reporting requirements that went into effect at the start of this year, that may require your business entity to report its beneficial ownership information to the Federal government.   

Beginning on Jan. 1, 2024, many companies in the United States will have to report about their beneficial owners, i.e., the individuals who ultimately own or control the company.   

The required Beneficial Ownership Information Report (BOI) is filed with the Financial Crimes Enforcement Network (FinCEN). FinCEN is a bureau of the U.S. Department of the Treasury. These reports will be used to establish a database of companies and their beneficial ownership to be used by law enforcement agencies. This is not an Internal Revenue Service (IRS) or State issue.  
Please note, this will be a free filing that companies can complete themselves. Please be wary of official-looking mail from a third-party company offering to complete the beneficial ownership reporting on behalf of your company for a fee.  

Do you need to report? 

Most businesses that need to file are small or medium-sized businesses. Your company may need to report information about its beneficial owners if it is: 

1. A corporation, S-Corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe; or 
2. A foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing. 

 
Why should you report? 

There are significant penalties for missing filing deadlines, including criminal (fines and/or imprisonment) or civil (monetary) penalties. There is a $500 per day penalty, up to $10,000, and imprisonment of up to two years for the WILLFUL failure to timely file initial or updated reports. It will be your exclusive responsibility to comply with CTA, including its BOI reporting requirements.  

How do you report? 

Reporting companies will have to report beneficial ownership information electronically through FinCEN’s website: www.fincen.gov/boi.   

When do you report?  

Reports will be accepted starting on Jan. 1, 2024. 

• If your company was created or registered before Jan. 1, 2024, you will have until Jan. 1, 2025, to report BOI. 
• If your company is created or registered on or after Jan. 1, 2024 and before Jan. 1, 2025, you must report BOI within 90 days of notice of creation or registration. 
• If your company is created or registered on or after Jan. 1, 2025 you must report BOI within 30 days of notice of creation or registration. 
• If there is any change to the required information about your company or its beneficial owners in a BOI report that your company filed, your company must file an updated BOI report no later than 30 days after the date on which the change occurred. The same 30-day timeline applies to changes in information submitted by an individual in order to obtain a FinCEN identifier.  
• A reporting company is not required to file an updated report for any changes to previously reported personal information about a company applicant (defined below).  

 
What information will be reported?  

The following type of information will be required to file a report under the CTA: 

Reporting Company (The Business Entity) 

• Full legal name 
• Any and all trade name or “doing business as” (DBA) name 
• Complete current U.S. address 
• State, tribal or foreign jurisdiction of formation 
• Internal Revenue Service (IRS) Taxpayer Identification Number (TIN)  

 
Beneficial Owner(s)  
A Beneficial Owner is any person who is an Officer, Director or 25% or more Owner of the Reporting Company – those who ultimately own or control a company. Other persons who exercise control and/or perform the roles of Officers, Directors or act as an Owner but are not named as such may also be considered Beneficial Owners such as an LLC Manager who is not an owner. Please consult your legal counsel if you have questions as to who may qualify as a Beneficial Owner under the law. 

• Full legal name 
• Date of birth 
• Complete current address (residential, no P.O. Boxes) 
• Unique identifying number with image 
• State driver’s license 
• U.S. passport 
• ID document issued by a state, local government or tribe 
• If none of the above, then foreign passport 

 
Company Applicant (For a ‘Reporting Company’ formed Jan. 1, 2024, or thereafter) 

• Full legal name of the person applying for or registering the reporting company with the secretary of state or similar agency. 
• Date of birth 
• Complete current address (residential, no P.O. Boxes) 
• Unique identifying number with image 
• State driver’s license 
• U.S. passport 
• ID document issued by a state, local government or tribe 
• If none of the above, then foreign passport 

What constitutes a change and requires an updated report filing? 

If there is any change to the required information listed above about your company or its beneficial owners in a BOI report that your company filed, your company must file an updated BOI report no later than 30 days after the date on which the change occurred.  

The same 30-day timeline applies to changes in information submitted by an individual in order to obtain a FinCEN identifier.  

A reporting company is not required to file an updated report for any changes to previously reported personal information about a company applicant. 

The same penalties described above pertain to updated report filings in addition to the initial report filing. 
Some likely triggers and or examples (not inclusive) of the changes that would require an updated beneficial ownership information report include: 

• Any change to the information reported for the reporting company, such as registering a new business name, trade name or DBA. 
• A change in beneficial owners, such as a new CEO, or a sale that changes who meets the ownership interest threshold of 25%, or the death of a beneficial owner (Note: When a beneficial owner dies, resulting in changes to the reporting company’s beneficial owners, report those changes within 30 days of when the deceased beneficial owner’s estate is settled. The updated report should, to the extent appropriate, identify any new beneficial owners.) 
• Any change to a beneficial owner’s name, address or unique identifying number previously provided to FinCEN. 
• If a beneficial owner obtained a new driver’s license or other identifying document that includes a changed name, address, or identifying number, the reporting company also would have to file an updated beneficial ownership information report with FinCEN, including an image of the new identifying document. 
• Relating to the special reporting rule for a minor child. When a beneficial owner that was a minor child reaches the age of majority, you must file an updated BOI report, identifying the individual as a beneficial owner and, if warranted, replacing their parent or legal guardian’s information with their own. 
• If an inaccuracy is identified in a BOI report that your company filed, your company must correct it no later than 30 days after the date your company became aware of the inaccuracy or had reason to know of it. This includes any inaccuracy in the required information provided about your company, its beneficial owners, or its company applicants. The same 30-day timeline applies to inaccuracies in information submitted by an individual in order to obtain a FinCEN identifier. 

Additional information can be found at https://www.fincen.gov/boi. Please consult with your legal counsel on additional questions and or concerns regarding how BOI reporting requirements and issues affects your company.  

Assisting with compliance and or filing of the CTA, including BOI reporting, is not within the scope of the tax and accounting services we provide. It will be your exclusive responsibility to comply with CTA, including its BOI reporting requirements.  

Under certain circumstances where there is not a question of law regarding the interpretation or determination of a beneficial owner (i.e. simple and straight-forward beneficial ownership) or where legal counsel has provided opinions, we may be engaged under a separate engagement from our tax and accounting services to prepare the initial filing compliance. Please reach out to us for more information if interested. 

As stated previously, compliance with the CTA, including the BOI reporting applies to most businesses including single member LLCs, which are treated as a disregarded entity for income tax reporting. A disregarded entity does not have a filing requirement with the Internal Revenue Service (no separate tax return). Finally, we are posting this blog to make you aware of these new current reporting requirements, associated risks, and suggest you contact legal counsel to assist you with the CTA and related BOI filings for entities that you own or control.