01/12/2024
As you may have heard, Federal law (the Corporate Transparency Act (CTA)) requires companies that were created via a filing with the secretary of state’s office—including but not limited to LLCs, corporations, business trusts, limited partnerships, and limited liability limited partnerships—to file a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury or face potential civil and criminal penalties.
The primary objective behind mandating such reporting is to enhance transparency and curb money laundering, financial corruption, terrorism financing, and foreign espionage.
Under the rule, a “beneficial owner” includes any individual who, directly or indirectly, either (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25 percent of the ownership interests of a reporting company.
DEADLINE TO FILE THE BOI REPORT WITH FINCEN:
For entities that were formed:
• Prior to 2024, the BOI must be filed no later than 1/1/2025;
• On or after 1/1/2024 but before 1/1/2025, the BOI must be filed no later than 90 days after the company was formed; and
• On or after 1/1/2025, the BOI must be filed no later than 30 days after the company was formed.
EXCLUDED COMPANIES:
Nearly all entities must timely file a BOI report with FinCEN. There are, however, 23 specific exemptions, which include:
• Publicly Traded Companies: Entities that are issued securities registered under Section 12 of the Securities Exchange Act of 1934 or that are required to file supplementary and periodic information under Section 15(d) of the same act.
• Governmental Entities: Entities established under the laws of the United States, a state, or a political subdivision of a state, or under an interstate compact between two or more states, that exercise governmental authority on behalf of the United States or any such state or political subdivision.
• Banks and Credit Unions: Entities that are federally or state-chartered banks, bank holding companies, savings and loan holding companies, or credit unions.
• Bank Holding Companies and Savings and Loan Holding Companies: As defined in and regulated by the Federal Reserve.
• Money Transmitting Businesses: Entities registered with and regulated by FinCEN as money transmitting businesses.
• Brokers or Dealers in Securities: Entities registered with the Securities and Exchange Commission (SEC) or self-regulatory organizations as brokers or dealers in securities.
• Securities Exchanges and Clearing Agencies: Entities registered with the SEC as securities exchanges or clearing agencies.
• Investment Companies and Investment Advisers: Entities registered with the SEC as investment companies or investment advisers.
• Insurance Companies: Entities that are regulated and supervised by a state insurance authority.
• Commodity Exchange Act Registered Entities: Entities registered under the Commodity Exchange Act.
• Accounting Firms: Entities subject to regulation under Section 102 of the Sarbanes-Oxley Act of 2002.
• Public Accounting Firms: As defined in the Sarbanes-Oxley Act.
• Public Utilities: Entities that provide telecommunications, electrical, gas, or water services and are subject to regulation by a state or federal utility commission.
• Tax-Exempt Organizations: Entities exempt from taxation under the Internal Revenue Code.
• Certain Pooled Investment Vehicles: Entities operated or advised by a bank, credit union, or registered investment adviser.
• Inactive Businesses: Entities that are not actively engaged in business and were formed before January 1, 2020.
CONSEQUENCE OF NON-COMPLIANCE:
Failure to comply with these reporting requirements may result in penalties and legal consequences. These penalties include:
• Civil Penalties: A civil penalty of up to $500 for each day the violation continues, accruing until the failure to report is corrected.
• Criminal Penalties: For willful failure to report or for knowingly providing false or fraudulent beneficial ownership information, there can be a fine of up to $10,000 and/or imprisonment for up to two years.
HOW WE CAN HELP:
Our attorneys understand that navigating regulatory changes can be challenging. To ease this process, we offer our services to assist you in compiling and submitting the necessary information accurately and within the specified timeframe.
If you would like our help, please email us at [email protected]. Our attorneys and support staff will guide you through the process and provide you with a checklist of the information needed to compile your report. The final report will be filed electronically through FinCEN’s portal. We aim to make this compliance process as seamless as possible for you. And we value your trust and the opportunity to serve as your legal counsel. Should you have any questions or require further clarification, please do not hesitate to email us at [email protected] to schedule a meeting.
