In our last post, we broke down the basics of the Corporate Transparency Act (CTA). In this one, we’re going to take a deeper dive into when businesses must file and what information they need to provide.
As we mentioned before, the Financial Crimes Enforcement Network (FinCEN) estimates that over 32 million existing businesses (aka “reporting companies”) will be impacted, as well as an additional 5 million per year thereafter. So, let’s delve into when they will need to file and what those filings will entail.
When do reporting companies have to file?
Any domestic or foreign reporting company created before January 1, 2024, must file a report no later than January 1, 2025. That said, they can file any time prior to that deadline. Meaning any existing entities will have a full year to file.
Any domestic or foreign reporting company created on or after January 1, 2024, must file an initial report within 30 calendar days of filing their registration or formation.
Remember, there are also some entities that are exempt from the impending reporting requirements. Read more on that here.
What information must be reported?
For reporting companies created before January 1, 2024, the beneficial ownership information (BOI) report must include information on the reporting company itself as well as the beneficial owners of the entity. Reporting companies created on or after January 1, 2024 must also include information about the company applicants.
Reporting Company Information:
(1) The reporting company’s full legal name;
(2) Any trade names or “doing business as” names of the reporting company;
(3) A complete current address consisting of:
(a) the reporting company’s principal place of business in the United States; or
(b) in all other cases, the street address of the primary location in the United States where the reporting company conducts business;
(4) The State, Tribal, or foreign jurisdiction of formation of the reporting company;
(5) For a foreign reporting company, the State or Tribal jurisdiction where such company first registers; and
(6) The Internal Revenue Service Taxpayer Identification Number (TIN) of the reporting company, or for foreign reporting companies that have not been issued a TIN, a foreign tax identification number and the name of the relevant jurisdiction.
Beneficial Owner and Company Applicant Information (For Each Individual):
(1) Full legal name;
(2) Date of birth;
(3) A complete current address consisting of:
(a) the individual’s residential street address; or
(b) in the case of a company applicant who forms or registers an entity in the course of such company applicant’s business, the street address of such business;
(4) A unique identifying number from an acceptable identification document defined as:
(a) a non-expired U.S. passport;
(b) a non-expired identification document issued by a state, local government or Indian tribe;
(c) a non-expired driver’s license issued by a state; or
(d) if the individual does not possess any of the aforementioned documents, a non-expired foreign passport.
(5) An image of document the unique identifying number came from.
Please note, reporting companies created prior to January 1, 2024 do not need to provide information regarding the company applicant(s).
Need to update information?
A report must be updated when there is “any change with respect to required information previously submitted to FinCEN concerning a reporting company or its beneficial owners.” Reporting companies will have 30 days to report changes to the information in their previously filed reports. FinCEN has simplified this process by no longer requiring company applicant information to be updated.
Need to make a correction?
The final rule provides a 90-day safe harbor if inaccurate or incomplete information is filed. Reporting companies can submit a correction (no later than 90 days after the original report) to prevent civil or criminal liability.
What are the penalties for violations?
The penalties for reporting companies who fail to comply may include:
- civil penalties up to $500 per day until the violation is corrected;
- and a criminal fine of up to $10,000
- and/or up to two years in prison.
At this time, we suggest that companies begin assessing their reporting obligations. If your company will be required to comply, it might be a good time to start preparing by identifying any “beneficial owners.” Likewise, companies may want to develop internal procedures for updating BOI information.
There are still ambiguities in several critical aspects of the CTA. FinCEN is still in the process of developing the infrastructure and system needed to administer the requirements as well as to store the information securely. Additionally, FinCEN is in the process of creating the forms by which entities will report the required information. As such, we aren’t yet certain what the process will look like.
The final rule does state that FinCEN will prioritize education and outreach to the private sector to promote implementation and facilitate compliance. Additionally, our team will continue to monitor the situation. We will keep readers updated as we learn more about the new reporting requirements.
More information on the topic:
We strongly recommend that anyone assisting in or directing the formation of entities (either directly or via a trusted service provider) read the final rule. Visit the FinCEN website to learn more. To read the final rule in its entirety, go here.