PHB-Piehl Hanson Beckman

Beneficial Ownership Information Reporting

IMPORTANT ACTION REQUIRED: Beneficial Ownership Information Reporting under the Corporate Transparency Act

We are writing to inform you about the requirements and obligations under the Corporate Transparency Act (CTA) concerning beneficial ownership information reporting. It is essential that you are aware of these requirements as you may have to take action before January 1, 2025.

Our Firm’s Role

While we strive to provide comprehensive financial services to our clients, we want to inform you that our firm will not be assisting with the beneficial ownership information reporting process required by the CTA. See the information below for details on how to file.

Background on the Corporate Transparency Act (CTA)

The Corporate Transparency Act was enacted on January 1, 2021, as part of the Anti-Money Laundering Act of 2020. The purpose of the CTA is to combat illicit activities such as money laundering, terrorist financing, tax evasion, and other forms of financial crime by increasing transparency in corporate structures. The Act mandates that certain companies disclose their beneficial ownership information to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).

Who Must File?

Under the CTA, a “reporting company” is required to file beneficial ownership information. A reporting company is defined as any corporation, limited liability company (LLC), or similar entity that is created by filing a document with a secretary of state or similar office under the law of a state or Indian tribe or formed under the law of a foreign country and registered to do business in the United States.

Exceptions to Filing

Certain entities are exempt from filing under the CTA (https://www.fincen.gov/boi-faqs#C_2). These exemptions include but are not limited to:

  • Tax-exempt entities, including certain nonprofits.
  • Entities employing more than 20 employees, having an operating presence at a physical office in the U.S., and reporting more than $5 million in gross receipts or sales.

Definition of a Beneficial Owner

A beneficial owner is any individual who directly or indirectly:

Timeline

The CTA’s reporting requirements are effective January 1, 2024.

  • If a company exists prior to January 1, 2024, it must file its initial BOI report before January 1, 2025.
  • If a company is created or registered to do business in the United States on or after January 1, 2024, then it must file its initial BOI report within 90 days of receiving actual or public notice that its creation or registration is effective.
  • On January 1, 2025, the 90-day reporting window for new companies will shift to a 30-day reporting window moving forward.
  • For both new and existing companies, any additional changes to beneficial ownership must be reported within 30 days of the change. Additional changes include, but are not limited to (https://www.fincen.gov/boi-faqs#H_2):
    • A change to the business name
    • A change in beneficial owners
    • A change in any beneficial owners name, address, or identifying number

Penalties for Non-Compliance

Failure to comply with the CTA’s reporting requirements can result in significant penalties, including:

  • Civil penalties of up to $500 per day that the violation continues.
  • Criminal penalties, including fines of up to $10,000 and/or imprisonment for up to two years for willful violations.

Steps to File

If a company exists prior to January 1, 2024, it must file its initial BOI report before January 1, 2025.

  1. Review Your Business Entity Structure: Determine whether your company is subject to the reporting requirements under the CTA.
  2. Gather the Required Information: If required, gather the business’ legal name, address, state of jurisdiction, TIN, and all beneficial owner information, including name, date of birth, address, and driver’s license or passport.
  3. Prepare and File Reports: If required, prepare and submit the necessary reports to FinCEN by the applicable deadlines using one of the following options:
    • File for Free Online on FINCEN’s Website: https://boiefiling.fincen.gov/
    • File Online With Third Party Software (Fees May Apply)
    • Consult a Legal Professional

For any additional information on the filing and disclosure requirements and exemptions, please refer to the Small-Entity Compliance Guide available online at www.fincen.gov.