Sweeping new legislation imposes a new filing requirement on many entities. The penalties for failing to comply in a timely manner can be extremely severe.
Under the laws of many states, disclosure of a corporate entity’s owners is not required. The Congress, in enacting this legislation, determined that this privacy is routinely utilized by criminal enterprises and presents an obstacle to federal law enforcement in the investigation of money laundering and other financial crimes.
The Corporate Transparency Act (“CTA”) was enacted in 2021 to create a database of beneficial ownership information for law enforcement to utilize when conducting its investigations. The CTA compels most small entities created or registered to do business through a filing with a state Secretary of State to file a Beneficial Ownership Information (“BOI”) report to the Financial Crimes Enforcement Network (“FinCEN”).
The CTA is violated when an individual willfully causes a reporting company to either file a false or fraudulent BOI Report, or to not file a BOI Report. Violations are punishable by a $500 daily fine with a maximum fine of $10,000, and up to 2 years of imprisonment.
This law became effective January 1, 2024. Entities formed on or after January 1, 2024, must file a BOI report within 90 days of their creation. Entities existing prior to January 1, 2024, must file their BOI report before January 1, 2025.
While the basic requirements of the CTA seem simple on their face, compliance can become complicated in a number of circumstances. Attorneys at Greensfelder, Hemker & Gale will be happy to aid and advise your navigation of this new law.
Frequently Asked Questions
Q: Who is required to file a report?
Reporting companies themselves, not beneficial owner individuals, must file a BOI report. A reporting company is any entity created or registered to do business through a filing with a state Secretary of State office unless exempt under the law. There are 23 exemptions, including a notable Large Operating Company exemption defined by certain revenue and employee headcount criteria. Other exemptions relate to existing financial regulations, non-profit status, and other enumerated categories. We at Greensfelder, Hemker & Gale, P.C. will be happy to advise whether an entity qualifies for one of these 23 exemptions.
Q: Who is a beneficial owner?
Under the law, any person who either 1) beneficially owns 25 percent of the reporting company’s ownership interests; 2) has substantial influence over major decisions of the company; or 3) is a senior officer of the company, qualifies as a beneficial owner.
Q: What information about beneficial owners must be reported?
The following pieces of information will be included in the BOI report for all beneficial owners:
- Full Legal Name
- Date of Birth
- Complete Residential Address
- Unique Identifying Number
- United States Passport
- State Driver’s License
- Identification Document issued by State, local government, or Tribe.
- Image of Unique Identifying Number Document
Q: Will beneficial ownership information collected under the CTA be public?
No. Information collected through BOI reports will be held privately by FinCEN, and only utilized for law enforcement purposes.
Q: What if ownership interests are held in trust?
The purpose of the law is to identify beneficial owners, whether their interests are held directly or indirectly. Depending on the circumstances, trustees, beneficiaries, or grantors/settlors could each qualify as beneficial owners. We at Greensfelder, Hemker & Gale will be happy to advise which persons in a trust arrangement may qualify as beneficial owners of a reporting company.
Q: How will BOI reports be filed?
BOI reports will be filed online through a portal maintained by FinCEN.
Important Firm Update
Greensfelder Hemker & Gale PC recently announced that, as of February 1, 2024, the firm will combine with Ulmer & Berne LLP to create UB Greensfelder, an Am Law 200, super-regional firm of 275 lawyers. You can learn more about the merger by clicking here.