AM Monthly Law Alert: Corporate Transparency Act Deadline Looming: What to Do
The Corporate Transparency Act (CTA) took effect on January 1, 2024. If you formed a company any time after that date, then I hope you were told that you needed to make a Beneficial Ownership Information (BOI) CTA filing with the United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) within ninety days of receiving formal notification of the successful formation of the company. If not, stop reading, and find everything you need to know here.
If, in January, you had an existing company, and do not fit any of the 23 categories of reporting exemptions, then your December 31st deadline to file your BOI is quickly approaching. For starters, let’s take a look at which companies fit the exemptions. Non-exhaustively, the exemption categories include:
- large operating companies, defined as a company with (i) 20 or more full-time U.S. employees, (ii) $5 million or more in U.S. revenue; and (iii) an operating presence at a physical office in the U.S;
- entities registered with the SEC, such as public companies and brokers-dealers;
- banking institutions;
- non-bank financial institutions such as investment companies, investment advisers, venture capital fund advisers, and insurance companies;
- governmental authorities;
- credit unions;
- inactive entities;
- accounting firms;
- tax-exempt entities and entities assisting a tax-exempt entity; and
- direct and indirect wholly owned subsidiaries of most of the 23 exempt entities.
If you are not within one of those exemptions, then your deadline is looming. Let’s take a hypothetical, common businessperson and use her as an example. Businessperson X has three wholly owned LLCs, a couple of which own real property, and one of which owns equipment used by another business. She also owns an interest in 3 other, smaller businesses in which she has invested funds in return for equity stakes (in each case, around 25%) and, in one case, a board seat. In addition, she owns 30% of her own operating business, in which she serves as an officer. In this hypothetical, none of these entities fits an exemption category. So, she needs to make 7 different filings, one for each of these entities.
Each BOI filing requires that a company set out its “beneficial owners,” which means any individual who, directly or indirectly, either exercises substantial control over the reporting company or owns or controls at least 25 percent of the ownership interests of the reporting company; substantial control usually is indicated by (i) service as a senior officer; (ii) having authority over the appointment or removal of any senior officer or a majority of the board of directors; and (iii) having direction or substantial influence over conventionally “important decisions.”
For each beneficial owner, a company’s BOI filing has to set out either a FinCEN ID number; or an upload of a government issued identification and the individual’s address, date of birth, legal name and document number from the government issued identification. If any of the uploaded information changes thereafter, it must be amended in the FinCEN portal.
My practical advice to our hypothetical businessperson is to get a FinCEN ID number. Then you merely visit one place to update your address if you move and you do not have to provide your personal documents to the party making your BOI filing.
To create this FinCEN ID number, you will need to go to the treasury website and sign in with LOGIN.GOV. You will need to do this personally. Creating your own account is not difficult and it is free. Once you have set up your account and registered, you will need the same information that you would otherwise use for the BOI filing, but you need only submit it once. You will receive a unique FINCen ID number that can then be used in lieu of your personal documents for every single BOI filing that’s needed. The process is simpler and quicker even than applying for an EIN.
An added benefit is that the person filing your BOI report needs only to enter your FINCen ID number, rather than go through the process of entering your information and uploading your identification document.
For more information, please contact Champe Fitzhugh.
Click here to learn more about the Corporate Transparency Act.
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