Effective Jan. 1, 2024, The Corporate Transparency Act (CTA), has been introduced. For small businesses, understanding the implications of this legislation and complying with its provisions are essential to maintaining compliance and fostering trust with stakeholders. The US Treasury from the Financial Crimes Enforcement Network is the agency where you would report www.fincen.gov.
Before delving into the specifics of the Corporate Transparency Act, it’s crucial to grasp the concept of beneficial ownership. Beneficial owners are individuals who ultimately own or control a significant portion of a company’s equity, voting rights, or assets, either directly or indirectly. The Corporate Transparency Act has a focus of combating financial crimes such as money laundering, tax evasion, and terrorist financing, as it helps authorities trace the flow of funds and uncover illicit activities hidden behind opaque corporate structures.
A reporting company created or registered to do business before Jan. 1, 2024, will have until Jan. 1, 2025, to file its initial beneficial ownership information report. A reporting company created or registered on or after Jan. 1, 2024, and before Jan. 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report. This 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.
Reporting companies created or registered on or after Jan. 1, 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports with FinCEN.
A sole proprietorship is not a reporting company. An entity is a reporting company only if it was created (or, if a foreign company, registered to do business) in the United States by filing such a document. Filing a document with a government agency to obtain (1) an IRS employer identification number, (2) a fictitious business name, or (3) a professional or occupational license does not create a new entity, and therefore does not make a sole proprietorship filing such a document a reporting company.
A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control (see Question D.2) over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interest.
A reporting company will have to report:
- Its legal name;
- Any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names;
- The current street address of its principal place of business if that address is in the United States (for example, a U.S. reporting company’s headquarters), or, for reporting companies whose principal place of business is outside the United States, the current address from which the company conducts business in the United States (for example, a foreign reporting company’s U.S. headquarters);
- Its jurisdiction of formation or registration; and
- Its Taxpayer Identification Number (or, if a foreign reporting company has not been issued a TIN, a tax identification number issued by a foreign jurisdiction and the name of the jurisdiction).
FinCEN will permit federal, state, local, and tribal officials, as well as certain foreign officials who submit a request through a U.S. Federal government agency, to obtain beneficial ownership information for authorized activities related to national security, intelligence, and law enforcement. Financial institutions will have access to beneficial ownership information in certain circumstances, with the consent of the reporting company. Those financial institutions’ regulators will also have access to beneficial ownership information when they supervise the financial institutions.
Companies required to report are called reporting companies. There are two types of reporting companies:
- Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
- Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.
Registration is not difficult and should be completed just once but if there is a change there should be a new registration. The website is really helpful. Please don’t hesitate to ask questions. You don’t want to be negligent.