What is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) is a new law requiring certain entities to disclose certain information to the Financial Crimes Enforcement Network (FinCEN). The purpose of this law is to combat money laundering, terrorism, tax evasion, and other misconduct being run through shell companies or companies with intentionally shady ownership structures.
Yawn, am I right? Well, while this may sound like something only corporate lawyers and C-suite occupants might care about, it actually has a much greater reach. Although the name implies otherwise, the Corporate Transparency Act does not only apply to corporations – it applies to all entities which meet the definition of a “reporting company.”
What is a reporting company?
A reporting company is any corporation, LLC, limited partnership or similar entity created by filing a document with any US state, territory or Indian tribe.
The Corporate Transparency Act requires “reporting companies” to submit a report called a Beneficial Ownership Information Report to FinCEN which provides the company’s legal name, current address, jurisdiction of formation, EIN, and personal information about the company’s beneficial owners.
This reporting requirement of the Corporate Transparency Act applies to all companies ranging from large corporations to single-member LLCs.
Who is considered a beneficial owner?
There are two ways an individual can be considered a beneficial owner.
First, a beneficial owner is any individual who owns or controls at least 25% of the ownership interest in a reporting company. Ownership interests includes any mechanism used to determine ownership, including but not limited to stock, voting rights, and/or equity.
Second, a beneficial owner is an individual who exercises substantial control over the reporting company. This definition is broad and encompasses anyone who can be considered to have substantial influence over important matters, from CEOs to board members.
Every company will have at least one beneficial owner; however, it is likely many companies will have multiple beneficial owners.
Each reporting company will have to report the following information for each beneficial owners:
- Legal name
- Residential address
- Date of birth
- Identification numbers from the beneficial owner’s non-expired driver’s license, state ID card, or passport
How can I be sure if my company is considered a reporting company or if I am considered a beneficial owner?
The Corporate Transparency Act is new and there are several questions about how the rules will be interpreted in the future. Keep in mind that failure to report or update a company’s Beneficial Ownership Information report can result in significant fees – up to $500 per day the company is not in compliance, up to a maximum of $10,000. In cases of fraudulent reporting, these fines could be paired with two years in prison. Therefore, it is better to err on the side of caution by providing more information rather than less.
When is the Beneficial Ownership Information Report due to FinCEN?
The deadline to submit your Beneficial Ownership Information Report for the Corporate Transparency Act depends on the date the company was formed.
- For all entities formed on or before December 31, 2023, the deadline is January 1, 2025.
- For all entities formed between January 1, 2024 and December 31, 2024, the deadline is 90 days after formation.
- For all entities formed on or after January 1, 2025, the deadline is 30 days after formation.
How do I complete the Beneficial Ownership Information Report?
The Beneficial Ownership Information Report for the Corporate Transparency Act must be completed on the FinCEN BOI E-Filing System, which can be found at https://boiefiling.fincen.gov/.
As always, the best way to make sure you’re protected is to seek competent professional. Our legal team at Legacy Estate & Elder Law has the experience and expertise to guide you through this important deadline before time is up.
The information provided is not intended to be legal or tax advice and does not constitute any attorney/client relationship. You should consult with an attorney for individual advice regarding your own situation.
Ms. Melancon is an attorney with Legacy Estate & Elder Law of Louisiana, LLC with offices in Baton Rouge, New Orleans and Lake Charles, LA. The primary focus of her practice is estate planning, probate, special needs planning, and elder law. For more information or to attend an upcoming estate planning seminar, call her office at (225) 744-0027.
