On January 1, 2024, new registration and reporting obligations for businesses and business owners under the Corporate Transparency Act came into effect.
With certain limited exceptions, business entities (corporations, limited liability companies, partnerships, and similarly formed entities) must provide business ownership information to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Failure to report the required information to FinCEN will result in financial penalties.
There are two key take-aways:
- The vast majority of business entities in existence before January 1, 2024 must file with FinCEN before the end of 2024 in order to comply with the new law.
- The vast majority of business entities newly formed on or after January 1, 2024 have similar reporting requirements but with shorter deadlines to file.
Who is Impacted?
“Reporting Companies,” which are, with limited exceptions:
- Limited Liability Companies
- Other entities registered with the Secretary of State, including certain kinds of trusts
“Beneficial Owners,” which are:
- Individuals who:
- Directly or indirectly own 25% or more of a Reporting Company
- Make major decisions for a Reporting Company
- Are senior officers
- Have power to appoint or remove senior officers
- Otherwise have substantial control over a company
There are special rules for determining Beneficial Owners when corporate entities or trusts own 25% or more of a Reporting Company or exert substantial control over a Reporting Company. Beneficial Owners are always individuals and may include trustees and trust beneficiaries, as well as officers and directors of companies.
“Company Applicants” which are:
- Applicable only to Reporting Companies formed on or after January 1, 2024
- Are individuals involved in filing the entity creation documents
What do I need to report to FinCEN?
A Beneficial Ownership Information Report must be filed, which includes sensitive identifying information.
Beneficial Owners each must report the following information: name, residential address, birth date, and a scan of a government-issued ID (such as a driver’s license or passport).
All Reporting Companies will need to provide their full legal name, any trade names, and a current U.S. address. Domestic companies will also need to provide (i) a TIN or EIN issued by the IRS, and (ii) the jurisdiction where the company was created. Foreign companies will also need to provide (i) a TIN or EIN issued by the IRS (if they have one; otherwise, they must provide a foreign tax identification number), (ii) country of formation, and (iii) jurisdiction where the company was first registered in the United States.
Who can access the information I send to FinCEN?
Beneficial Ownership Information Reports are not public information. For authorized activities related to national security, intelligence, and law enforcement, FinCEN will send Beneficial Ownership Information to Federal, State, local, and Tribal officials, or certain foreign officials.
How often do I need to report information to FinCEN?
After the first report is made to FinCEN, you are required to update FinCEN within 30 days whenever any of the following information contained in the Beneficial Ownership Information Report changes:
- Changes of address
- Changes in ownership of the Reporting Company
- Changes of a Beneficial Owner’s name
- Changes to a Reporting Company’s name
When do I need to file my first report?
The timeframe for filing the first report depends on when the Reporting Company was created or first registered in the United States.
|Creation or Registration Date
|Before January 1, 2024
|File before January 1, 2025
|Between January 1, 2024, and January 1, 2025
|File within 90 days of creation
|On or after January 1, 2025
|File within 30 days of creation
What do I need to do now?
Make plans to file required Beneficial Ownership Information Reports for each Reporting Company in your control or that you are planning to create. You may choose to report to FinCEN yourself or direct someone else to report to FinCEN for you.
Timely planning and action are the best ways to ensure compliance with the Corporate Transparency Act.
If you would like Seder & Chandler, LLP to assist with the filing of any Beneficial Ownership Information Report, please contact one of our attorneys. Please note that Seder & Chandler, LLP will not file a Beneficial Ownership Information Report unless specifically engaged to do so.
Where can I find further information? Follow this link to access FinCEN’s official page for information, guidance, and resources on Beneficial Ownership Information reporting: https://www.fincen.gov/boi