**IMPACTING ALL WELLS MARBLE & HURST, PLLC, CLIENTS WITH LLCS, PARTNERSHIPS AND CORPORATIONS
Beginning on January 1, 2024, the reporting obligations imposed by the Corporate Transparency Act (the “CTA”) will go into effect causing many companies to be required to file a report with the U.S. Treasury’s Financial Crimes and Enforcement Network (“FinCEN”). The report must include information about the Reporting Company itself, its “Beneficial Owners”, and its “Company Applicants” (if applicable).
Who Has to Report?
Companies required to report are called reporting companies. Reporting companies may have to obtain information from their beneficial owners and report that information to FinCEN. Your company may be a reporting company and need to report information about its beneficial owners if your company is:
- A corporation, a limited liability company (LLC), a limited partnership (LP), 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
- A foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing.
Who Does Not Have to Report?
- Twenty-three types of entities are exempt from the beneficial ownership information reporting requirements. These entities include publicly traded companies, nonprofits, and certain large operating companies.
(See FinCEN’s Small Entity Compliance Guide referenced at the bottom of this article for more information.)
When Do I Report?
Reports will be accepted starting on January 1, 2024.
- If your company was created or registered prior to January 1, 2024, you will have until January 1, 2025 to report to FinCEN.
- If your company is created or registered after January 1, 2024, you must report to FinCEN within 90 days of notice of creation or registration. The report must include information about (1) the Reporting Company itself, (2) its Beneficial Owners, and (3) its Company Applicants.
A “Beneficial Owner” is any individual who, directly or indirectly, (i) exercises substantial control over the entity (e.g. LLC manager, corporate officer, etc.), or (ii) owns twenty-five percent (25%) or more of the ownership interests in a Reporting Company. It is important to note that individuals holding a fiduciary position within a trust structure owning an interest in a Reporting Company may also be considered a Beneficial Owner.
A “Company Applicant” is defined as (i) the person who directly files the formation or registration document of the Reporting Company and/or (ii) the person who was primarily responsible for the filing.
- Any updates or corrections to beneficial ownership information that you previously filed with FinCEN must be submitted within 30 days.
**FinCEN cannot accept reports before January 1, 2024.
- In addition to the initial filing obligation imposed upon Reporting Companies under the CTA, if a Reporting Company experiences any changes to the report initially filed with FinCEN (e.g., a change in Beneficial Owners), the CTA requires that the Reporting Company file an updated report within thirty (30) days of such change taking effect.
Are There Any Penalties?
- FinCEN is working hard to ensure that reporting companies are aware of their obligations to report, update, and correct beneficial ownership information. FinCEN understands this is a new requirement. If you correct a mistake or omission within 90 days of the deadline for the original report, you may avoid being penalized.
- However, failure to comply with the CTA reporting obligation may result in a fine ranging from $25,000 to $250,759 (see 31 C.F.R. section 1010.821), depending on the nature of the violation, and criminal liability up to two (2) years in prison (see 31 C.F.R. section 1010.840(d)). A person is responsible for a willful violation of the reporting requirements if that person caused the failure to report or is a senior officer of the reporting entity at the time of the violation.
Where Can I Learn More?
You can find guidance materials and additional information by visiting any of the following sites:
- The Financial Crimes Enforcement Network (www.fincen.gov/boi)
- Small Entity Compliance Guide (BOI Small Compliance Guide (fincen.gov)
- Beneficial Ownership Information FAQ’s (Beneficial Ownership Information Reporting | FinCEN.gov)