Effective January 1, 2024, most new and existing corporate entities in the United States will be required to file reports on their beneficial owners with the federal government.  These requirements are part of the Corporate Transparency Act and are expected to impact many business entities.

What is the Corporate Transparency Act?

The Corporate Transparency Act, or CTA, is an expansion of anti-money laundering laws and is intended to help prevent and combat money laundering, terrorist financing, corruption, tax fraud and other illicit activity.

Who is required to file reports?

Domestic reporting company – any entity that is a corporation, a limited liability company, or otherwise created by the filing of a document with the secretary of state or similar office.

Foreign reporting company – any entity formed under the law of a foreign country and registered to do business in any US state by the filing of a document with the secretary of state or similar office.

Exemptions for filing include sole proprietorships, trusts, and general partnerships since these entities do not require the filing of a formal document with the secretary of state.  There is also an exemption for large operating companies defined as any entity with 1) more than 20 full-time US employees, 2) an operating presence at a physical office within the US and 3) more than $5.0mm of US sourced gross receipts reported on its prior year federal income tax return.

What is the due date of the initial report?

The due date for the initial report depends on when the entity was created:

1. If the company was created on or after January 1, 2024, then the initial report is due within 30 calendar days of the date the entity is created.
2. If the company was formed before January 1, 2024, then the initial report is due no later than January 1, 2025.
3. If there is a change to previously reported information about the reporting company or its beneficial owners, an updated report must be filed within 30 days of the change.

What information is included in the report?

Reports include information about:

1. The reporting company, including full legal name, trade name, current address, jurisdiction of formation and federal taxpayer ID number.
2. The reporting company’s beneficial owners, including full legal name, date of birth, current address, unique identifying number and issuing jurisdiction (passport, driver’s license), and image of document with identifying number.
3. The company applicants who made the filings to create the entity. If the reporting company is formed or registered after 2023, the same information is required as #2 above.  Otherwise, no information is required for the company’s applicants.

Alternatively, individuals and entities may apply for and obtain a FinCEN identifier, which can be included on subsequent filings in lieu of the information above.

How do I file?

Reports must be filed electronically.  FinCEN’s e-filing portal, available at https://boiefiling.fincen.gov, provides two methods:  1) by filling out a web-based version of the form and submitting it online, or 2) by uploading a completed PDF version of the report.

If you have any questions about these new reporting rules and how they affect your business, please contact your L&P accountant who would be happy to discuss them with you.