On Tuesday, December 3, 2024, a federal district court in the Eastern District of Texas, issued an order granting a nationwide preliminary injunction that: (1) enjoins the Corporate Transparency Act (CTA), including enforcement of that statute and regulations implementing its beneficial ownership information reporting requirements, and, specifically, (2) stays all deadlines to comply with the CTA’s reporting requirements. FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect.
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The Corporate Transparency Act (signed into law on January 1, 2021) expanded anti-money laundering laws and created new reporting requirements for certain companies doing business in the United States. Beginning in 2024, many small businesses are required to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN) in an effort to create a national database for use by national security and law enforcement agencies to prevent the use of shell companies for criminal activity. This filing is mandatory.
There are a few options available to assist you with completing your BOI reporting:
Option 1:
We have partnered with FileForms.com to streamline the BOI reporting process for your organization. FileForms.com will walk you through each step securely and ensure your organization remains in compliance. FileForms.com will notify owners when their photo I.D. expires so they can update within the 30 day time requirement. The application will also assist in collecting information from the beneficial owners of an organization, allowing each to input their own information. Our direct link to get started can be found here BOI Form Filing with FileForms.com. (FileForms provides our Firm a referral fee of 20%).
Option 2:
Complete the filing on your own using the Financial Crimes Enforcement Network website, https://www.fincen.gov/boi. It is highly recommended you retain all documentation resulting from the filing and ensure you are updating any personal information within 30 days of a change.
Option 3:
For existing clients, you can schedule a consultation with our Firm after April 15 to discuss before filing.
WHO MUST FILE?
Both domestic and foreign reporting companies are required to file reports. A company is considered a reporting company if a document was filed with the secretary of state (SOS) or similar office to create or register the entity. Corporations (including S corporations), LLCs, and other entities formed through the SOS are subject to the reporting requirements. But, because sole proprietorships, trusts, and general partnerships do not require the filing of a formal document with the SOS, they generally are not considered a reporting company and will not have a filing requirement. Foreign companies are required to file reports if they are registered with the SOS or similar office under state law.
Some companies are exempt from reporting, but many of the exempted companies are already required to report ownership information to a governmental authority. Of particular interest to you may be the exemption for large operating companies. A large operating company is any entity with (a) more than 20 full-time US employees, (b) an operating presence at a physical office within the US, and (c) more than $5,000,000 of US-sourced gross receipts reported on its prior year federal income tax return. If you meet these qualifications, you are not subject to the new reporting requirements.
WHAT INFORMATION MUST BE PROVIDED?
Reporting Companies are required to report their full legal name, trade name or “doing business as” (DBA) name, current U.S. address, State, Tribal, or foreign jurisdiction of formation, and Internal Revenue Service (IRS) Taxpayer Identification Number (TIN), such as an Employer Identification Number (EIN) or a foreign tax identification number and the name of such jurisdiction.
Reporting Companies are required to report certain information about each of their Beneficial Owners. Beneficial Owners are defined as individuals who own, directly or indirectly, 25% or more of the ownership interests of a Reporting Company or exercise substantial control over the company. An individual may be a Beneficial Owner through substantial control, ownership interests, or both. Companies can have multiple Beneficial Owners, such as multiple individuals who own or control 25% of the company and senior officers or important decision-makers of the company. There is no limit to the number of Beneficial Owners a company may have.
Companies formed on or after January 1, 2024, must also report information about their Company Applicants. Company Applicants are individuals who either directly file the formation or registration document with a secretary of state or similar office or are primarily responsible for overseeing the relevant document. Common examples of Company Applicants include attorneys, registered agents, or company formation professionals. These individuals typically file a formation document or registration with a secretary of state or similar office to create a company.
Each Beneficial Owner and Company Applicant is required to report their full legal name, date of birth, current address, a unique identification number, and an image of the identification document, such as a valid driver’s license or passport. Beneficial Owners must disclose their current residential street address, while Company Applicants are required to report their business street address.
PENALTIES FOR NON-COMPLIANCE:
Reporting Companies that fail to report Beneficial Ownership information may be subject to civil penalties, accruing up to $500 per day, capping at $10,0000. Criminal penalties of imprisonment for up to two years may also be enforced for failing to comply with BOI Reporting requirements. The Reporting Company and its senior officers may be held liable for these penalties. Further, a Beneficial Owner may also be subject to civil and/or criminal penalties for knowingly causing a company not to file a BOI Report or providing incomplete or false information to FinCEN. For example, if an individual who qualifies as a Beneficial Owner refuses to provide their identifying documents or other required information for a Reporting Company to file a complete and accurate BOI Report, the Beneficial Owner may be subject to penalties by FinCEN.
ADDITIONAL RESOURCES:
Financial Crimes Enforcement Network: https://www.fincen.gov
BOI Reporting Frequently Asked Questions: https://www.fincen.gov/boi-faqs
Small Entity Compliance Guide: https://www.fincen.gov/boi/small-entity-compliance-guide
Corporate Transparency Act: https://www.fincen.gov/sites/default/files/shared/Corporate_Transparency_Act.pdf