Corporate Transparency Act Reporting Requirements

By: Melissa Palmer

This resource is being provided to you has a preliminary overview and should not be construed as technical or legal advice or opinion. This does not constitute representation between yourself and Kinkead & Stilz, PLLC for compliance with the Corporate Transparency Act and/or any required filings.

 

OVERVIEW

Effective January 1, 2024, a significant number of businesses are now required to comply with the Corporate Transparency Act (CTA). The CTA requires reporting of company Beneficial Ownership Information (BOI) with the Financial Crimes Enforcement Network (FinCEN).

  • The CTA is not part of the tax code but is instead part of the Bank Secrecy Act
  • The intent of the BOI reporting requirement is to combat money laundering, terrorism financing, and other illicit activity
  • Failure to comply with the reporting requirements can result in criminal and civil penalties

Now that you know the acronyms, let’s delve into the who, what and when of the initial filing requirements.

 

WHO IS REQUIRED TO REPORT?

All domestic and foreign entities that file, or have filed, formation or registration documents with a U.S. state (such as filing with the Kentucky Secretary of State), including single-member LLCs.

  1. Domestic entities not created by filing documents with a secretary of state or similar office are exempt from reporting under the CTA
  2. Twenty three (23) types of entities are exempt from reporting requirements, including:
    • Large operating entities
    • Tax-exempt entities
    • Publicly traded companies that have registered under Section 102 of the Sarbanes-Oxley Act (SOX)
    • For the full list, visit the FinCEN website (Question C.1)

These reporting obligations are targeting small businesses.

 

WHEN IS IT DUE?

The initial reporting requirement is being phased-in based on formation date of the entity.

  • Entities formed/registered in 2024 are required to file within 90 days of formation
  • Entities formed/registered in 2025 are required to file within 30 days of formation
  • Entities formed/registered before 2024 are required to file by January 1, 2025

Ongoing reporting is required if the entity or any BOI has a change in information outlined below or inaccuracies are discovered in previous reports. The filing is due withing 30 days of a change or discovery of an inaccuracy. Information required to be reported to FinCEN must be correct and current at all times.

 

WHAT DO YOU REPORT?

Entities are required to report the following information:

  • Company legal name, trade name and/or Doing Business As (DBA) name
  • Company address
  • State or tribal jurisdiction of formation
  • IRS Taxpayer Identification Number (TIN)
  • Details about the company’s Beneficial Owners

 

WHO OR WHAT ARE BENEFICIAL OWNERS?

Beneficial Owners are individuals who directly or indirectly:

  1. Own or control at least 25% of the ownership interest of the reporting company; OR
  2. Exercise “substantial control” over the reporting company

An individual has “substantial control” over the reporting company if they direct, determine or exercise substantial influence over important decisions of the reporting company. This is a broad definition that may need to be further evaluated within your reporting company.* This includes any senior officers of the reporting company regardless of formal title or whether they have ownership interest in the reporting company.

*Many companies may need to seek legal guidance to determine the company’s beneficial owners based on “substantial control.”

 

WHAT INFORMATION DO I NEED TO REPORT ABOUT BENEFICIAL OWNERS?

You must report for each beneficial owner:

  • Legal name
  • Date of birth
  • Residential address (no PO boxes)
  • Unique identifying number and issuing jurisdiction from an acceptable identification document, including an image of the identification document. Examples of identification documents include driver’s license or passport

    OR

  • FinCEN Identification Number for each beneficial owner. FinCEN IDs are available for individuals who do not wish to give personal information to the reporting company. An individual may obtain a FinCEN ID here. The individual applies directly to FinCEN and is issued a unique FinCEN ID. This unique ID is given to the reporting company to use in their reporting requirements. The individual is required to update their personal information with FinCEN if there are any changes (address, etc.).

 

If the reporting company is formed on or after January 1, 2024, you must also report the above information for each company applicant.

  • No more than two (2) individuals can be reported as a Company Applicant for each entity. The Company Applicant is the individual who directly files the document to create or register the company with the Secretary of State and, if applicable, the Company Applicant’s supervisor. The Company Applicant’s supervisor is the individual who directed the filing with the Secretary of State to create the entity

 

HOW AND WHERE DO I FILE?

All information is filed electronically through a secure filing system available via FinCEN’s website. Both initial filings and update filings are completed via this website.

 

WHAT HAPPENS IF I DON’T FILE?

Penalties for non-compliance include both:

  • Civil penalties of up to $500 per day for ongoing violation(s)
  • Criminal penalties of up to two (2) years of imprisonment and/or up to a $10,000 fine

 

I THINK I MIGHT NEED HELP!

Kinkead & Stilz is more than happy to assist you with your company’s initial reporting requirements to comply with the Corporate Transparency Act. Please contact us at 859-296-2300 to further discuss our potential representation and assistance with this matter.

 

We strongly recommend all existing entities take immediate action to address the initial reporting requirement as soon as possible or setup a reminder to ensure filings are completed by the end of 2024. Additionally, if you are planning on forming a new entity in 2024, keep in mind that you will need to satisfy the FinCEN reporting requirements within 90 days of formation. Any new entity formed on or after January 1, 2025, will need to file with FinCEN within 30 days of formation.

Communication of information by, in, to or through this site and your receipt or use of it (1) is not provided in the course of and does not create or constitute an attorney-client relationship, (2) is not intended as a solicitation, (3) is not intended to convey or constitute legal advice, and (4) is not a substitute for obtaining legal advice from a qualified attorney. You should not act upon any such information without first seeking qualified professional counsel on your specific matter.

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