Corporate Transparency Act and Reporting Requirements

The federal government passed the Corporate Transparency Act (CTA) in 2020.  It requires companies to report certain information about the individuals who control the company, who are called “Beneficial Owners.”  The only way to report the information required by the CTA is by filing an online report with the US Treasury’s Financial Crimes Enforcement Network (FinCEN).  The report is called a Beneficial Owner Information report (BOI) and is filed at www.fincen.gov/boi.

The CTA is designed to combat money laundering, financing of terrorism and other illicit activity by creating a national registry of beneficial ownership information on “Reporting Companies.”  The system is designed to increase transparency and reduce the number of shell companies being used to hide fraud and corruption.  The beneficial ownership information is not public; it will be accessible by law enforcement agencies only.

REPORTING COMPANIES, COMPANY APPLICANTS AND FINCEN IDENTIFIERS

Reporting Companies are required to identify and report on individuals who (1) own or control at least 25% of a company’s interest in any form; or (2) have substantial control over the company in other ways.  All Reporting Companies must have at least one Beneficial Owner who is an individual, and not an entity.  In addition, Company Applicants must also report their BOI.  A “Company Applicant” is an individual who files a document for the formation of a company on or after January 1, 2024, as well as an individual who directs another to file documents for the formation of a company.  For example, a paralegal and the supervising lawyer who file organizing documents for a company are considered Company Applicants, but only if the company was formed in 2024 or after. 

A FinCEN Identifier is a unique identifying number that FinCEN will issue to an individual of a Reporting Company upon request.  The FinCEN Identifier is not required, but it can be useful as a short-hand method of reporting an individual’s BOI by using the number and not having to input the data and upload an identifying document for each Reporting Company.

INFORMATION TO BE REPORTED

The BOI information that must be included for a Reporting Company includes its legal name, its trade name or DBA (doing business as), its current address in the US, the jurisdiction where the company was formed and its taxpayer information number (TIN or EIN).

The BOI information that must be provided for a Beneficial Owner includes the person’s residential address and, for a Company Applicant, the person’s business address.  In addition, the person must provide the unique identifying number from their driver’s license, US Passport, state identification document or foreign passport plus a photograph or identifying document.

TIME FOR FILING

All BOI reports, both the initial filing and any updates, must be filed electronically starting January 1, 2024.  For Reporting Companies formed before 2024, the BOI reports are due by January 1, 2025.  For Reporting Companies that were organized on January 1, 2024 or later, the information is due within 90 days of the formation of the company.  All updates or clarifications of previously filed reports must be filed within 30 days from the date of the change.  For example, if a Reporting Company changes its address or there is a change in control of the Reporting Company, that information must be filed within 30 days of the change. 

EXEMPTIONS

FinCEN has published a list of 23 exemptions for companies that do not have to report.  These are largely broken down into an extensive list of regulated companies (e.g., banks, insurance companies and public companies), inactive companies and what are called “Large Companies.”  Large Companies are those with a location in the US, 20 or more full-time employees and $5 million or more of revenue or sales reported on its most recent tax report.  All other companies, unless otherwise exempt, that do not meet the requirements for Large Companies must file a BOI report with FinCEN.

PENALTIES

The FinCEN rules contain civil and criminal penalties for the willful failure to report.  These include civil penalties of $500 per day for noncompliance and criminal penalties of 2 years in prison and a fine of up to $10,000.

If you have questions about whether your company is a Reporting Company under the CTA or what information to report to FinCEN, please contact Nelson Genshaft or Aaron Firstenberger at our firm (614/228-6345) or by email for Nelson at neg@columbuslawyer.net or for Aaron at acf@columbuslawyer.net.