The Federal Corporate Transparency Act (CTA), which was passed in early 2021, requires certain reporting entities to file information about their beneficial owners (i.e., the individuals who ultimately own or control the company). This beneficial ownership information (BOI) is reported through an electronic filing system with the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the Treasury Department.
This post reviews some of the important information relative to the BOI reporting requirements and includes links to FinCEN resources and some of our prior BOI-related posts at the end. If you have any questions regarding these requirements and how they might impact you or your business, please reach out to your GYF executive at 412-338-9300.
Filing Deadlines for Initial BOI Reports
Domestic reporting companies created or registered to do business in the United States and foreign reporting companies registered to do business in the United States before January 1, 2024, must file their initial report with FinCEN no later than January 1, 2025. Newly created or registered companies created or registered to do business in the United States in 2024 have 90 calendar days to file after receiving actual or public notice that their company’s creation or registration is effective.
If your company was created or registered on or after January 1, 2025, it must file its initial beneficial ownership information report within 30 calendar days after receiving actual or public notice that its creation or registration is effective.
Any updates or corrections to beneficial ownership information previously filed with FinCEN must be submitted within 30 calendar days.
Reporting Entities
Generally, any corporation, limited liability company, or any other entity that is created by filing a document with a secretary of state or similar office under state or tribal laws, or is formed under foreign law and registered to do business in the United States by filing a document with a secretary of state or similar office under state or tribal laws, is a reporting company that must disclose information regarding its beneficial owners and its company applicants to FinCEN under the Corporate Transparency Act.
Exemptions
There are exclusions for heavily regulated entities that already report such information to other federal agencies, or companies with real business activities that are not perceived to be a high risk for money laundering. Additionally, the reporting requirements do not apply to an inactive entities or “Large operating companies.”
To qualify for the large operating company exception, the company must:
- employ more than 20 full-time employees in the United States;
- have an operating presence at a physical office in the United States; and
- have reported gross receipts (net of returns) of over $5M on the previous year’s tax return.
Beneficial Owner
A beneficial owner is an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, either:
- exercises substantial control over the reporting company; or
- owns or controls at least 25% of the ownership interests of the reporting company.
However, beneficial owners do not include minor children; nominees, intermediaries, custodians, or agents; employees; inheritors; or creditors.
Company Applicant
A company applicant is the individual who files the document with a secretary of state or any similar office under state or Indian tribe law that:
- creates the domestic reporting company, or
- registers the foreign reporting company to do business in the United States.
Further, the individual who is primarily responsible for directing or controlling that filing by another individual is also a company applicant.
Information to Be Reported
A reporting company must disclose the identity of each beneficial owner of the company and each company applicant. For each individual who is a beneficial owner or a company applicant, the reported information must include:
- full legal name;
- date of birth;
- residential street address;
- an identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of identification document; and
- an image of the document described in (4).
The reporting company must also report the following about itself:
- full legal name;
- trade name or “doing business as” name;
- complete current address (the street address of its principal place of business in the United States; if no U.S. principal place of business, then the street address of the primary location in the United States where it conducts business);
- state, tribal, or foreign jurisdiction of formation;
- for a foreign reporting company, the state or tribal jurisdiction where it first registers; and
- taxpayer identification number (TIN) and employer identification number (EIN) (if a foreign reporting company has no TIN, then a tax identification number issued by a foreign jurisdiction and the jurisdiction’s name).
If a reporting company is created or registered on or after January 1, 2024, the reporting company will need to report information about itself, its beneficial owners, and its company applicants. If a reporting company was created or registered before January 1, 2024, the reporting company only needs to provide information about itself and its beneficial owners. The reporting company does not need to provide information about its company applicants.
Risk of Non-Compliance
Penalties may be imposed for failure to file, including civil penalties of up to $500 per day, criminal penalties of up to $10,000, and imprisonment for up to two years.
Resources:
FinCEN BOI Informational Brochure
FinCEN BOI Informational Videos
Small Entity Compliance Guide for BOI Reporting Requirements
Related Posts:
Federal CTA – Beneficial Ownership Reporting – Updates to FAQs
