Corporate Transparency Act Reporting to Begin January 1, 2024
Beginning January 1, 2024, corporations, limited liability companies, and other entities that file with the Secretary of State must report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). The FinCEN is a bureau of the Department of the Treasury, separate from the IRS, that collects and analyzes information to combat financial crimes.
Under the reporting requirements, entities that were created or registered before January 1, 2024, must file their beneficial ownership information by January 1, 2025. Entities that were created or registered after January 1, 2024, have 30 days after formation or registration to submit their required disclosure report with FinCEN. Upon filing an initial report, any change in beneficial ownership must be reported by filing a new disclosure within 30 days of the change.
The Corporate Transparency Act includes 23 exemptions from the reporting requirements. One main exemption is for large operating companies with 20 or more full-time US employees, with more than $5 million in sales, and a physical operating presence in the United States.
Beneficial owners are any individuals who, directly or indirectly, either exercise substantial control, or own or control, at least 25% of the ownership interests of such reporting company. Ownership interest and control are broadly construed and may be determined by many different instruments of ownership such as stock, capital, profits interests, convertible notes, and warrants, among other instruments. Control can be established through roles in the company such as any “senior officer” positions, or through contracts or joint ownership.
Information to be reported about these beneficial owners includes full legal name, date of birth, current home address, a driver’s license number or passport number, and a copy of that driver’s license or passport.
Failure to timely file a beneficial ownership disclosure may result in civil and/or criminal penalties.
Detailed information can be found at www.fincen.gov/boi-faqs.