11/27/2024
CORPORATE TRANSPARENCY ACT AND FINCEN REPORTING
Under the Corporate Transparency Act, certain information about Beneficial Owners of certain small business entities must be provided to the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Treasury Department. Also, it is important to keep in mind that when a trust is an equity owner of a reporting company, it can create significant reporting requirements for individuals named in positions of power and control within the trust.
The deadline to submit a Beneficial Ownership Information Report (“BOIR”) is January 1, 2025 for all reporting companies formed prior to 2024. All reporting companies formed in 2024, must file a BOIR within 30 days of registration.
There are fines and penalties for not timely filing a BOIR, including up to $592 per day.
First, what is considered a reporting company that is required to report under the Corporate Transparency Act? All corporations, limited liability companies and other similar entities that are registered in the United States are required to file a BOIR. Publicly traded companies registered on the Securities and Exchange Commission (“SEC”) and large operating companies with more than 20 full time employees and that have over $5 million in annual revenue are exempt from filing. Other government entities, banks and nonprofits are also exempt.
Second, who is deemed a beneficial owner? “A beneficial owner is any individual who either: (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25 percent of a reporting company’s ownership interests. Exercising substantial control or owning or controlling ownership interests may be direct or indirect, including through any contract, arrangement, understanding, relationship, or otherwise.”
If you own a small business that is considered a reporting company, you must file a BOIR on or before January 1, 2025. You can file your BOIR at: https://boir.com/filing/file. It will likely take 20 minutes or less to do so, and as previously mentioned there can be hefty fines for the failure to comply.
Please keep in mind that if a trust owns a reporting company (i.e. you assigned your interest in your business to a trust), the trustees of the trust will likely be deemed to be beneficial owners of the reporting company. Also, trust protectors and others with substantial control over the trust may also be considered to be beneficial owners of the reporting company. Many individuals who have set up trusts for estate planning purposes assign small businesses to their trusts as part of the estate planning process. So, it is important to consider what individuals who have authority within your trust document are also able to exercise substantial control over the reporting company as a result of it being owned by the trust. If you are unsure, discuss these matters with an attorney well versed in the Corporate Transparency Act to see who will need to be disclosed as beneficial owners.
If you have any questions or need additional guidance, contact Hansen Legal LLC to learn more.
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