Reporting Requirement. Beginning January 1, 2024, a new Federal regulation called the “Corporate Transparency Act” goes into effect requiring most corporations, LLCs, and other entities created in or registered to do business in the U.S. to file a report at https://www.Fincen.Gov/BOI about both the business entity and each individual beneficial owner (called BOIs) to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
When was the law enacted? In 2021 — but it goes into effect January 1, 2024. In fact I wrote about it back in 2021, as the government’s way of stopping anonymous ownership of real estate. https://www.ftic.net/2021/03/02/corporate-ownership-disclosure/.
Source of information. More information may be found in FinCEN’s “Small Entity Compliance Guide”, Instructional Video on YouTube, and FAQ’s.
Is there a Fee for Reporting? No. So Don’t get Scammed!
Penalties for Not Reporting? A person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. That person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.
Purpose of the New Law? According to US Treasury Secretary Janet Yellen, corporate transparency is needed to prevent criminals from hiding behind anonymous shell companies to launder proceeds from illicit activities, corruption, tax evasion, drug trafficking, fraud, human trafficking, and other crimes. This dirty money undermines fair business competition and poses risks to our country’s economic and National Security.
Who is a BOI for Reporting Purposes? A Beneficial Owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company (e.g. senior officer, authority to appoint or remove, important decision-maker, other forms of substantial control), or (2) owns or controls at least 25% of the reporting company’s ownership interests.
When Do I have to File? FinCEN begins accepting reports on January 1, 2024. For companies created before 01/01/24, reports must be filed with FinCEN by 01/01/25. For newly formed companies after January 1, 2024, the company has 90 days after receiving notice of its creation to file with FinCEN. For newly formed companies after January 1, 2025, the company has 30 days after receiving notice of its creation to file with FinCEN. Companies are also obligated to report corrections, changes, and updates.
When do I have to Report Changes, Corrections, or Updates? Yes, report any changes about your company or its BOI within 30 days of the change or when you became aware of the inaccuracy or had reason to know of it.
Is there an Annual Reporting Requirement? No.
Which Companies are Exempt from Reporting? There are twenty-three (23) categories of entities that are exempt from the reporting requirement. Examples include: banks, credit unions, tax exempt entities registered with the IRS, public utilities, some types of larger companies, and inactive companies (meeting a 6 factors). A full list can be found at https://www.fincen.gov/boi-faqs#C_2.
How do Companies and BOIs Report? Go to https://www.fincen.gov/boi and file electronically.
Is my Information Confidential? Somewhat. FinCEN stores BOI reports in a secure database and will permit judges, prosecutors and other authorities that meet specific criteria, the U.S. Department of the Treasury Federal, State, local, and Tribal officials, as well as certain foreign officials who submit a request through a U.S. Federal government agency, to obtain beneficial ownership information (BOI) for authorized activities related to national security, intelligence, and law enforcement. Financial institutions will also have access to BOI in certain circumstances, with the consent of the reporting company. Those financial institutions’ regulators will also have access to beneficial ownership information when they supervise the financial institutions.
What Information Does the Reporting Company and its BOIs need to Report? A Few key pieces of information like:
- Business Entity’s Legal Name;
- Trade name or DBA;
- Address (not a P.O. Box);
- Jurisdiction where formed or first registered;
- Taxpayer Identification Number (TIN);
- If created after 01/01/24, the individuals that formed them, called the Company Applicants; and
- The entity’s BOIs (Beneficial Owner Information) such as their:
- Legal Name
- Birthdate
- Residential Address, and
- An ID# from a non-expired: DL, Passport, or U.S. State, or local government ID.
- Image of the identification document used for each individual.
How do I Get a TIN. The Internal Revenue Service (IRS) offers a free online application for an Employer Identification Number (EIN), a type of TIN, which is provided immediately upon submission of the application. For more information on TINs, see “Taxpayer Identification Numbers (TIN)” on the IRS.gov website. For more information on Employer Identification Numbers and to access the EIN online application, see “Apply for an Employer Identification Number (EIN) Online” on the IRS.gov website.
FRAUD ALERT: FinCEN has been notified of recent fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act. The fraudulent correspondence may be titled “Important Compliance Notice” and asks the recipient to click on a URL or to scan a QR code. Those e-mails or letters are fraudulent. FinCEN does not send unsolicited requests. Please do not respond to these fraudulent messages, or click on any links or scan any QR codes within them.
DISCLAIMER: Topics discussed are general concepts, not intended to constitute legal advice, accuracy, nor completeness, and may not be relied upon as such; consult an attorney or accountant. The author Randy Gilbert, J.D. is neither an attorney nor an accountant. FTIC is a national award winning title insurance company known for its white glove customer service and “No Junk Fee Guarantee.”