If you are a business owner, you need to know about the Corporate Transparency Act and how it affects you and your business. We asked attorney, Eric Ferguson, Esq of Ferguson & Naff Attorneys to help us understand this new legislation.
“In 2021, Congress adopted the Corporate Transparency Act. This new law imposes mandatory reporting requirements on most business entities beginning January 1, 2024. The new guidelines and regulations have been adopted by the Financial Crimes Enforcement Network of the U. S. Department of the Treasury. These new guidelines specify who must file a report, what information is required to be reported and when it must be reported,” says Ferguson.
The primary objective of the Corporate Transparency Act is to require certain corporations to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the United States Department of the Treasury. Beneficial ownership refers to individuals who ultimately own or control a company, including those who exercise substantial control (25% or more) over its management or receive substantial economic benefits from its operations.
“Control” would be exercised by senior officers, those who remove those senior officers, and those who make decisions for the corporation/LLC. If the beneficial owner is another legal entity, other than an individual, the information for those who own that entity would be required.
A third party consultant (such as an accountant) who does not own or make day to day decisions for your business does not need to apply. However, if you employ them full time and they work for you and are on your payroll, they are considered having substantial control and will need to complete the form.
Here’s the important part:
Beginning January 1, 2024, most small corporations and LLCs must file a Beneficial Ownership Interest (“BOI”) with FinCEN. These corporations and LLCs existing on January 1, 2024, will need to file these reports by the end of 2024. If your company is required to report your beneficial ownership details to FinCEN, you MUST do it by January 1, 2025. Any corporations and LLCs created after January 1, 2024, will need to file these reports within 90 days. If you do not do this in time, you can be hit with substantial penalties.
Here’s the good news: It’s incredibly easy (and FREE!) to report your ownership details.
Here’s how you do it:
- Visit the BOIR filing site.
- Decide if you want to file electronically or print a PDF and mail the form in.
- Submit the required information and documents:
- Full Legal Name
- Date of Birth
- Current Residential Address
- Tax ID Number
- Photo of Driver’s License or Passport
- Be sure to keep a copy of the transcript of your filing and KEEP IT somewhere safe.
- There is NO cost to submit the report.
“The information provided is supposedly confidential. It is certain to be available, however, to law enforcement and other government regulators” says Ferguson.
Please note: You only need to complete the report once but note that you do have to update it continuously and changes occur – even if it is just an address change for one of the people who are part of your report. You have to update within 30 days of any changes.
The act will primarily impact corporations, limited liability companies (LLCs), and similar entities formed or operating in the United States. Large companies (those corporations or LLCs with 20 or more full time employees in the U. S. having a physical operating presence in the U. S. with gross receipts or sales of over $5 million in the previous year as shown on a federal tax return) are exempt.
COMPANY TYPES EXEMPT FROM THIS REPORT
Securities reporting issuer
Governmental authority
Bank
Credit Union
Depository institution holding company
Money services business
Broker or dealer in securities
Securities exchange or clearing agency
Other Exchange Act registered entity
Investment company or investment adviser
Venture capital fund adviser
Insurance company
State-licensed insurance producer
Commodity Exchange Act registered entity
Accounting firm
Public utility
Financial market utility
Pooled investment vehicle
Tax-exempt entity
Entity assisting a tax-exempt entity
Large operating company
Subsidiary of certain exempt entities
Inactive entity
IF YOUR BUSINESS TYPE IS NOT ON THIS LIST, YOU MUST COMPLETE THE BOI REPORT.
IF YOU DO NOT DO THIS BY JANUARY 1, 2025, YOU WILL BE FINED $500 PER DAY THAT THE VIOLATION CONTINUES UP TO $10,000.00 AND A TWO YEAR PRISON TERM.
By mandating the disclosure of beneficial ownership information, the Corporate Transparency Act seeks to identify and expose those who exploit anonymously owned companies for illegal purposes. This information will be made available to law enforcement agencies, financial institutions, and other relevant authorities to effectively investigate and prevent financial crimes.
The Corporate Transparency Act’s stated purpose is to not only protect the integrity of the financial system but also ensure fair competition and a level playing field for businesses. It seeks to prevent the misuse of corporate structures for money laundering, tax evasion, and other illegal activities, thereby promoting a safer and more transparent business environment. By shedding light on beneficial ownership, this legislation aims to create a more resilient and trustworthy business environment, fostering sustainable economic growth and deterring illicit activities that harm society as a whole.
ADDITIONAL RESOURCES:
A special “thank you” to Eric H. Ferguson, Esq. of Ferguson & Naff Attorneys for sharing his expertise and guidance on this important topic.
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