Are you a business owner? If yes, are you unsure if the CTA filing obligations apply to you? Let’s take a closer look at which clients may be affected by this requirement, how to file, and the required information for the filing.
Introduction
TO: Owners of Corporations, LLCs, and Other Business Entities created by filing a document (articles of organization or incorporation) with a Secretary of State or similar office under the law of a state or Indian tribe.
WHAT: Corporate Transparency Act (CTA) – Report beneficial ownership information (BOI) to FinCEN by January 1, 2025.
WHY: Congress enacted the Corporate Transparency Act (CTA) in 2021 as part of the National Defense Authorization Act. The purpose of the CTA is to strip U.S. shell companies of anonymity that can hide illicit financial activity and for use in financing terrorist activities. Entities that qualify must report information to the Financial Crimes Enforcement Network (FinCEN), part of the U.S. Department of Treasury. The CTA impacts owners, principals, and other control persons involved in almost all limited liability companies (LLCs), corporations (both C and S corporations), limited partnerships (LPs), and other closely held entities.
What do I need to do?
Report the required information to FinCEN before the January 1, 2025, deadline by using FinCEN’s BOI e-filing website. You can report this information directly to FinCEN at no charge or authorize an accountant to file on your behalf. Those who created an entity this year are required to file within 90 days.
What information do I need to provide?
To complete the filing through FinCEN, the below information is required:
- Information about the company: Name, EIN, business address, and incorporation date.
- Information about the company’s beneficial owners and those with substantial control: Name, address, and photo documentation of a driver’s license or passport.
I’m unsure if I meet the definition. Can you provide examples of entities required to file?
- An LLC that holds rental real estate as part of an estate plan or asset protection plan.
- A professional corporation that holds a dental, medical, legal, or other professional practice.
- A corporation that holds the family business (unless it meets the large company exception; see below).
- Entities created as part of an investment plan (e.g., a holding company for securities or a small business or owning rental real estate).
- An estate plan (e.g., an LLC designed to hold various investments to facilitate trust funding or administration).
- Asset protection planning (any entity created to insulate the assets it holds or to insulate those who own the entity for claims arising from the assets the entity holds.
Who is exempt?
- Charities.
- Large companies (20 or more employees and $5 million or more in revenues).
- Certain types of other entities that are already subject to significant government regulation (e.g., banks).
- Governmental Authorities such as Tribal Entities.
- Certain subsidiaries of Governmental Authorities are also exempt, such as a tribally charted corporation.
Other important items to note:
- Dissolved entities may still have to file. If your entity is “inactive,” you must meet both requirements below to be exempt:
- The entity was in existence on or before January 1, 2020, and
- The entity is not engaged in active business.
- There’s no penalty for over-reporting.
What happens if I ignore this?
There are penalties and jail time if you don’t report!
What resources are available?
The following resources are available through FinCEN’s website:
Is this an annual filing?
No, not as of now. However, reporting companies must report changes to any filing within 30 days of any change. Note that it is not just the changed information; the entire form needs to be revised and submitted with each change within 30 days. The House of Representatives passed a bill that would change this period to 90 days, but the Senate has yet to pass it. A change concerning required information will be deemed to occur when the name, date of birth, address, or unique identifying number on such document changes. This is a burdensome and easy-to-miss requirement. If someone with ownership or control moves to a new residence or changes their name (e.g., gets married and takes on a new name), that change must be reported quickly.
Recommendation if you’re part of a larger organization required to file:
If there’s a reporting entity you’re identified with, get a FinCen identification number; then you don’t have to share all of your confidential information with the reporting company, and you can pass along your number.
Questions?
If you have any questions about the requirements for your specific situation, we encourage you to consult with your attorney or tax advisor. Please do not pass along any information to them unencrypted (e.g., driver’s license, EIC, etc).
Feel free to connect with us here if you have other questions that your attorney or tax preparer can’t answer regarding your CTA filing requirement.
Please consult with your financial advisor and/or tax professional to determine the suitability of these strategies. All views, expressions, and opinions in this communication are subject to change. This communication is not an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services.