The Corporate Transparency Act (31 U.S.C.A. § 5336) was enacted by Congress in 2021 and went into effect on January 1, 2024. The Act requires many companies doing business in the United States to report information about their “beneficial owners”, the individuals who ultimately own or control them to the U.S. Treasury Financial Crimes Enforcement Network (“FinCEN”). The Act defines “beneficial owners” as an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise exercises substantial control over the entity, or owns or controls not less than 25 percent of the ownership interests of the entity. Essentially anyone who runs the company or owns at least 25% of the company is considered a beneficial owner of the company. A beneficial owner cannot be another company. A beneficial owner is person and if a company is owned or ran by another company, or string of companies, the beneficial owner is the person or persons own at least 25% of or has substantial control over any of the controlling companies.
Despite being called the “Corporate” Transparency Act, the Act applies to all entities that are required to register with a secretary of state or similar state agency, including corporations, limited liability companies (LLC), limited liability partnerships (LLP) or any other entity that is created by filing of a document with a secretary of state or any similar office. The Act does not apply to sole proprietorships, general partnerships, or trusts, as those entities do not register with a secretary of state. The Act also does not apply to certain entities such as large operating companies (companies that have more than 20 full-time employees, that have more than $5,000,000 in reported gross receipts or sales in the prior tax year, and that have a physical office in the U.S.) already subject to federal or state oversite, including banks, credit unions, tax-exempt entities registered with the IRS (such as 501c3 charitable organizations), public utilities, insurance companies along with certain inactive companies.
Under the Act, reporting companies must submit a Beneficial Owner Information Report (“BOIR”) to FinCEN online through the BOI Filing System at https://boiefiling.fincen.gov/ These BOIRs must set forth the full names, address, birthday, and unique identification number (such as a U.S. passport number or state issued driver’s license or ID card) of each beneficial owner of the company and the individual who filed the formation documents for the company. Individuals who have reported this information to FinCEN and has additional reporting obligations, may request FinCEN identifier from FinCEN. Once the individual received their FinCEN identifier may report the FinCEN identifier for the individual instead of the required information. While there are currently no ongoing reporting requirements following the initial filing of the BOIR, reporting companies must report any changes to their beneficial ownership to FinCEN within 1 year of the beneficial ownership change.
Existing companies must submit their BOIR before January 1, 2025. Reporting companies established between January 1, 2024 and January 1, 2025 have 90 days from the date of formation to file their BOIR. Any entities formed after January 1, 2025 will have 30 days from the date of formation to file their initial BOIR.
For more information, contact Jason Loebach at Chitkowski Law Offices
630-824-4808
