New Reporting Requirement for Businesses Under the Corporate Transparency Act

What is FinCEN and Corporate Reporting Act?

Effective January 1, 2024 the Corporate Transparency Act (CTA) established a new reporting mandate for many companies. The CTA was enacted to combat illicit activities including tax fraud, money laundering, and financing for terrorism. Under this new federal law, many U.S. business owners are required to file a Beneficial Ownership Information Report (BOIR) with the Financial Crimes Enforcement Network (FinCEN) (a federal agency operating under the U.S. Department of the Treasury). The purpose of the BOIR is to identify individuals who control or own companies, thereby increasing transparency around business ownership and making it harder for criminals to hide behind anonymous shell companies.

Does My Business Need to File a Beneficial Ownership Information Report?

If your company does not qualify for one of the exemptions listed below, you must file the BOIR with FinCEN. If you own multiple entities, you will need to file a BOIR for each entity. You may file the required BOIR online using the following link: BOIR E-FILING (fincen.gov). Please see below and attached for more information.

Entities Required to File a BOIR:

• Corporations (including S-Corporations)
• Limited Liability Companies
• Limited Partnerships
• General Partnerships
• Limited Liability Partnerships
• Homeowners Associations and Unincorporated Associations who are not tax exempt under 501(c) and do not meet an exemption

Entities Not Required to Filing a BOIR (Exemptions):

• Securities reporting issuer
• Governmental authorities
• Banks
• Credit unions
• Depository institutions holding company
• Money services businesses
• Brokers or dealers in securities
• Securities exchanges or clearing agencies
• Other Exchange Act registered entities
• Investment companies or investment advisers
• Venture capital fund advisers
• Insurance companies
• State-licensed insurance producers
• Commodity Exchange Act registered entities
• Public accounting firms
• Public utilities
• Financial market utilities
• Pooled investment vehicles
• Tax-exempt entities (including HOAs)
• Entities assisting a tax-exempt entity
• Large operating companies
• Subsidiary of exempt entities
• Inactive entities

What Information Needs to Be Provided on the Beneficial Ownership Information Report?

For each entity you own, you will need to complete a beneficial ownership information report. On the BOIR, you will disclose identifying information about the individuals who directly or indirectly own or control the company.

The BOIR requires completing an online form that discloses all the names that the company operates under, the employer identification number (EIN), and the business address for each entity. Personal information, including the full legal name, date of birth, residential address, and an ID number and image (e.g., a driver’s license or passport), must be provided for all “beneficial owners” of the company. Beneficial owners are (1) owners that have a 25% or greater ownership interest in the business, and (2) individuals who exercise substantial control over the business, such as members of the Board of Directors, senior corporate officers or managers of LLCs, and certain key employees. A beneficial owner may apply for an individual FinCEN ID for use in the company BOIR at the following link: FinCEN ID | Financial Crimes Enforcement Network (FinCEN).

The company may also need to provide the personal information and identification document of the company applicant. If the company was formed before January 1, 2024, you do not need to report its company applicant. In this case, on the report form, check the box for “Existing Reporting Company” (item 16). For companies formed on or after January 1, 2024, identify the company applicant, i.e., the individual who directly filed the articles of incorporation, articles of organization, or other registration document for the company with the California Secretary of State’s Office.

How Does My Business File a Beneficial Ownership Information Report?

If you are required to report your company’s beneficial ownership information to FinCEN, you may file the required BOIR online using the following link: BOIR E-FILING (fincen.gov).

What Is the Deadline for Filing a Beneficial Ownership Information Report?

For entities formed before January 1, 2024, you must file the initial BOIR by January 1, 2025.

For entities formed after January 1, 2024, you must file the initial BOIR within 90 calendar days of receiving actual or public notice that its creation or registration is effective.

For entities formed on or after January 1, 2025, you must file the initial BOIR within 30 calendar days of receiving actual or public notice that its creation or registration is effective.

What are the Penalties for Non-Compliance?

A person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $591 for each day the violation continues and may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include intentionally failing to file a BOIR, intentionally filing false beneficial ownership information, or intentionally failing to correct or update previously reported beneficial ownership information.

As a business owner or manager, it’s crucial to understand whether your company falls under the Corporate Transparent Act’s reporting requirements and to prepare the necessary information ahead of the deadlines.  FinCEN’s step-by-step instructions for filing the BOIR can be found online here: Step-by-Step Instructions.

Myers, Widders, Gibson, Jones & Feingold, L.L.P. is a premier, full-service, and trustworthy law firm that specializes in a variety of legal disciplines. Our business and corporate law attorneys handle all aspects of business planning, start-up, organization, and disposition matters. Our attorneys serve clients in Ventura, Santa Barbara, San Luis Obispo and Los Angeles counties. For a free consultation, visit www.mwgjlaw.com or call 805-644-7188.