On January 1, 2024, the Corporate Transparency Act took effect and, among other things, requires most new entities to submit additional filings to federal regulators. The primary purpose is to combat money laundering, through transparency behind the ownership of corporations, limited liability companies (LLCs), partnerships, and any other entity that is created by the filing of a document with a Secretary of State or similar office under the law of a state or Indian tribe.

Each entity that is formed on or after January 1, 2024 is required to file a Beneficial Ownership Information Report (BOI Report) through an online portal operated by the Financial Crimes Enforcement Network (FinCEN) within 90 days of formation, unless a specific exemption applies. The BOI Report contains identifying information about the entity and its “beneficial owners,” which are individuals who directly or indirectly own at least 25 percent of the entity or control the entity. The company must report (1) its full legal name, (2) any trade or “doing business as” names, (3) the address of its principal place of business, its jurisdiction of formation, and (4) its taxpayer identification number.

Each beneficial owner must provide their (1) full legal name, (2) date of birth, (3) complete current residential street address, (4) unique identifying number and issuing jurisdiction from either a current US passport, state or local ID document, driver’s license, or if none of these are available, a foreign passport, and (5) an image of the document that is providing the unique identifying number.

Any changes to the information reported about the company or its beneficial owners must be disclosed in an updated report within 30 days after the date on which the change occurs. Similarly, any errors must be reported within 30 days of discovery by the company.

Any entity formed on or after January 1, 2025, must file a BOI Report within 30 days of formation. Additionally, any entity in existence prior to January 1, 2024 must file a BOI Report no later than January 1, 2025.

There are 23 categories of entities that are exempt from the requirement to file a BOI Report. These categories include publicly traded companies, tax-exempt entities, banks, credit unions, money services businesses, securities brokers and dealers, insurance companies, accounting firms, public utilities, and other heavily-regulated entities.

There is also an exemption for “large operating companies,” which are entities that (1) employ more than 20 full-time employees in the United States, (2) have an operating presence at a physical office within the United States, and (3) have filed a federal income tax or information return in the United States for the previous year demonstrating more than $5 million in gross receipts or sales.

The penalties for noncompliance with the Corporate Transparency Act include $500 per day in monetary penalties, with no maximum amount, and criminal penalties that may include a $10,000 fine, imprisonment for up to two years, or both.

For more information about the Corporate Transparency Act, please contact members of our Business Group Team, including including Barry Ziker, Dan Goodrich, Derek Woolston, Michael Edwards, Matthew Weger, and Robert Van Cleve. 

The information contained in this update is provided for informational purposes only. It should not be construed as business, legal, accounting, tax, financial, investment or other advice on any matter and should not be relied upon as such.