It’s officially 2024, and with the new year comes the implementation phase of the Corporate Transparency Act (CTA), part of the National Defense Authorization Act passed by Congress back in 2021. Passed as part of their continuing efforts to stem money laundering, the CTA authorizes the Financial Crimes Enforcement Network (FinCEN) to collect beneficial ownership information for certain corporations, limited liability companies (LLC), and similar entities created in or registered to do business in the United States.
The CTA requires business owners to compile information and report it to FinCEN via an online portal. The stated goal of the CTA and its implementing regulations is to provide essential information to law enforcement, national security agencies, and others to help prevent criminals, terrorists, proliferators, and corrupt oligarchs from hiding illicit money or other property in the United States.
FinCEN has launched the official BOI E-Filing website for reporting as of January 1, 2024, found here: https://www.fincen.gov/boi, and any company either created or registered to do business before this date will have until the start of next year to file its initial report. All reporting companies created or registered after the start of the 2024 year will have 90 calendar days to file after receiving actual or public notice that its creation or registration is effective.
As RELAW, APC originally advised back in our November 2022 Newsletter, here are the key questions to determine if you will need to report:
- What companies are “reporting companies” covered under the rule?
The rule identifies two types of reporting companies: domestic and foreign. A domestic reporting company is a corporation, LLC, or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe. A foreign reporting company is a corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office. FinCEN expects that these definitions mean that reporting companies will include limited liability partnerships, limited liability limited partnerships, business trusts, and most limited partnerships because such entities are generally created by a filing with a secretary of state or similar office.
Under the rule, twenty-three types of entities are exempt from the definition of “reporting company.” For a list of exempt entities, please visit the FinCEN website at FinCEN Exempt Entity Types. Other types of legal entities, including certain trusts, are excluded from the definitions to the extent that they are not created by the filing of a document with a secretary of state or similar office. FinCEN recognizes that in many states the creation of most trusts typically does not involve the filing of such a formation document.
- Who does the rule define as a “beneficial owner” who must report their personal information?
Under the rule, a beneficial owner includes any individual who, directly or indirectly, either (a) exercises substantial control over a reporting company (FinCEN Substantial Control Definition), or (b) owns or controls at least 25 percent of the ownership interests of a reporting company (FinCEN Ownership Definition). The CTA also exempts five types of individuals from the definition of “beneficial owner.” The exemptions are for: (a) Minor Child, (b) Nominee, intermediary, custodian, or agent, (c) employee, (d) inheritor, and (e) creditor. To see a full explanation of the beneficial owner exemptions, please review the BOI Small Compliance Guide.
- If reporting is required, what must be reported in the Beneficial Ownership Information Report (BOI reports)?
When filing BOI reports with FinCEN, the rule requires a reporting company to provide four pieces of identifying information about each of the beneficial owners: (a) Name: the full legal name of the individual; (b) Address: the current residential or business street address. Note: a P.O. box, address of the company formation agent or third party does not satisfy the requirement; (c) Date of birth; and (d) A unique identifying number and issuing jurisdiction from an acceptable identification document such as a nonexpired U.S. passport, nonexpired State-issued driver’s license, or nonexpired foreign passport. A copy of the identification document must also be uploaded into the BOI system to satisfy the identification requirements.
Some good news here is that there is no filing fee, and while many companies may elect to file themselves using guidance from the FinCEN website, it can be helpful for those with more complicated reporting to consult with professional service providers such as lawyers or accountants. RELAW, APC is proud to be one of the firms offering this service to our clients.