Overview
The Corporate Transparency Act is now in effect. Under the Act, most corporations and LLCs operating in the U.S. are required to file a beneficial ownership information report with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Penalties for non-compliance include $500-per-day fines, and willful violations may result in criminal penalties, including possible imprisonment. Companies should address this matter promptly.
How to File
Go to FinCEN’s BOI filing website at https://boiefiling.fincen.gov. Additional information is available at https://fincen.gov/boi-faqs. Rules for reporting ownership in complex structures, such as corporate subsidiaries, can be complicated, so seek specialist advice if needed.
Who Needs to File?
You must file a report if you are either a domestic or foreign reporting company, unless an exemption applies.
- Domestic Reporting Company: Any corporation, LLC, or similar entity formed by filing documents with a secretary of state or similar office in the U.S.
- Foreign Reporting Company: Any foreign entity registered to do business in the U.S. by filing documents with a state or tribal office.
Defunct companies may also have reporting obligations if they were not irrevocably dissolved prior to January 1, 2024.
Who Is Exempt?
Large operating companies are exempt if they meet all three of the following criteria:
- Employ more than 20 full-time U.S. employees.
- Maintain a physical office in the U.S.
- Have gross receipts or sales exceeding $5,000,000.
Other exemptions apply to entities like banks and insurance companies. However, affiliated entities might still have reporting obligations.
When Is the Filing Due?
- Existing Companies: Companies created before January 1, 2024, must file by January 1, 2025.
- New Companies: Companies formed in 2024 must file within 90 days of formation, and companies formed on or after January 1, 2025, must file within 30 days.
What Information Is Required?
You must report information on beneficial owners, including:
- Full legal name
- Date of birth
- Residential address
- An identifying number (e.g., driver’s license, passport) and an image of the document
Additionally, the report must include certain details about the company itself, such as its
name and address.
New companies must also report information about the individuals who formed the company (company applicants).
Who Is a Beneficial Owner?
A beneficial owner is any individual who exercises substantial control over the company or owns 25% or more of the ownership interests.
Updates Are Required
You must file updates with FinCEN within 30 days if there are any changes in beneficial ownership or control. Be sure to monitor any changes in beneficial ownership or control and file the necessary updates promptly to avoid penalties.
If you have any questions about these new requirements please contact the Emerging Companies attorneys and counselors at Young Basile.
