Under the Corporate Transparency Act (CTA), the deadline for “reporting companies” to file their initial beneficial ownership information (BOI) report with FinCEN is just weeks away. If you are responsible for a reporting company and haven’t filed your report, now is the time to collect the information needed to file your entity’s report before January 1, 2025.
Who Needs to Report?
A “reporting company” is a domestic or foreign corporation, limited liability company or other similar entity that is created or qualified to do business through a state filing with any U.S. secretary of state or similar body (e.g., the Michigan Department of Licensing and Regulatory Affairs, also known as LARA). Some exemptions to the filing rule exist, including exemptions for certain nonprofit entities, “large operating companies” that meet certain employee and revenue thresholds, and heavily regulated entities such as public companies, registered securities entities, insurance companies and banks.
What Must be Reported?
The BOI report must include information about the company and information about each beneficial owner of the entity.
A “beneficial owner” is any individual who, directly or indirectly: 1) exercises substantial control over the reporting company (e.g., through service as a senior executive such as CEO, CFO or general counsel or through other authority to make substantial decisions on behalf of the entity), 2) owns or controls 25% or more of the ownership interests of the reporting company or 3) owns or controls a majority of the voting equity in the reporting company. “Substantial control” and “ownership interests” are broad terms encompassing a wide variety of individuals, not just those with equity or vested equity in the entity.
The following information must be reported for each beneficial owner:
- Full legal name.
- Date of birth.
- Current residential address (business address for company applicants serving in a professional capacity).
- Unique identifying number from an acceptable identification document (e.g., a driver’s license, passport or other government-issued identification document for U.S. residents; for non-U.S. residents, a non-expired foreign passport).
- Image of the identification document.
For entities formed on or after January 1, 2024, the BOI report must include this same information about the company applicant(s) – those who 1) file an application to form an entity under the laws of a U.S. state or 2) are primarily responsible for directing or controlling the filing of such documents by another person.
An individual may obtain a unique FinCEN identifier number to use on BOI reports, which streamlines reporting and updating obligations.
What are the Penalties for Reporting Violations?
Violations of the CTA, such as failing to report in a timely manner, providing false information or failing to update previously reported information, are steep. Civil penalties can be up to $500 PER DAY that the violation continues, and criminal penalties can include a fine of up to $10,000 per day and/or imprisonment of up to two years. Senior officers of the reporting company may be held accountable for violations.
What Should I do Now?
Prepare to file:
- Determine if your organization will be a reporting company.
- Determine which individuals will be considered beneficial owners for the reporting company.
- Determine which individuals are company applicants for entities formed after January 1, 2024.
- Create a process and storage location for collecting, storing and updating the required information and document scans for each reporting company and beneficial owner.
- Collect the required information.
- If desired, obtain FinCEN numbers from their website for relevant reporting companies or beneficial owners if their information will need to be reported and updated in relation to multiple entities.
- Choose your service providers wisely if you seek assistance with reporting. FinCEN has alerted the public that bad actors are making fraudulent attempts to solicit information from both entities and individuals in relation to CTA reporting. Learn more about these scams in our previous eAlert here.
- Dissolve and wind-up entities that are no longer needed. Entities that fully ceased to exist on or prior to December 31, 2023, are not required to report. However, FinCEN has confirmed that any reporting company that existed during any part of 2024 is required to file a BOI report even if it is dissolved during 2024.
File your report:
Reports are filed using the FinCEN reporting portal. No paper filings will be accepted. No fees are required to file a report.
