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What is the Corporate Transparency Act and How to File

January 05, 20246 min read

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What is the Corporate Transparency Act?  

The 2024 Corporate Transparency Act, requires privately held domestically established companies to file reports with Financial Crimes Enforcement Network of the Department of the Treasury. (FinCEN). 

The Purpose of the Corporate Transparency Act

Sometimes, businesses use corporate structuring to maintain the privacy of the owners who benefit from the business. As of January 1, 2024, beneficial owners and applicants of qualifying reporting companies will be required to report identifying information to the federal government.

The purpose of the Corporate Transparency Act is so that the government can identify corporate owners and control illicit activity, including money laundering, the financing of terrorism, proliferation financing, serious tax fraud, human and drug trafficking, counterfeiting, piracy, securities fraud, financial fraud, and acts of foreign corruption. Why? In short, it can be easier to engage in these activities in the United States because of current rules surrounding corporate formation. Other countries currently have some versions of this law and Congress has been puttering around with it for some time. If you want the full 99 page dissertation of this, visit 1010 C.F.R. Section 1010.380, or just keep reading on!

Who does the Corporate Transparency Act apply to?

Is my business a “Reporting Company” and required to report information to the federal government? Businesses will be required to report certain information on beneficial owners and applicants if they are considered a “Reporting Company.” A Reporting Company is any corporation, LLC, or other similar entity that is created by the filing of a document with the Secretary of State or similar office under state or tribal law OR formed under laws of a foreign county and registered to do business in the US by filing documents with the Secretary of State. There are 23 exceptions but if you are a small business owner, this likely applies to YOU!  You may be exempt if you are a 501(c)3 tax exempt entity, a bank, credit union, insurance company, a pooled investment vehicle, or if you own a business with more than 20 full-time US employees and have $5 million or more in gross revenue, to name a few. If you have questions about whether the Corporate Transparency Act applies to your business, you might want to consult with an attorney. Grabbe Law Office may be able to help you navigate the requirements of the Corporate Transparency Act and advise whether it applies to your business. Book a complementary 15-minute Business Discovery Session with the Grabbe Law Office today.  

When do I report Beneficial Owner or Applicant information to FINCEN?

Reporting Companies registered before January 1, 2024 will have one year (January 1, 2025) to file their initial report, while companies registered or created after January 1, 2024 but before January 1, 2025 will have 90 days after receiving notice of their creation or registration to file their initial reports. Companies registered or created after January 1, 2025 will have 30 days after receiving notice of their creation or registration to file their initial reports. There’s also an ongoing duty to update this anytime time there is a change in a past report.  This is not an annual requirement and must only be submitted once, or anytime there is a change in beneficial ownership information.

What information do I have to report to FINCEN?

If you are a business who was registered before January 1, 2024, you will need to provide the name, birthdate, address and unique identifying number and issuing jurisdiction from an acceptable Identification document. Essentially, you’ll need to provide your driver’s license number, passport number, and a copy of that identification document for each beneficial owner. All this information ends up in a federal database.   

If you are a business who was registered after January 1, 2024, you will need to provide the information for both the beneficial owners and the applicants.

Who is a “Beneficial Owner” or “Applicant” according to FINCEN?

There’s some nuance to those definitions but be aware that the definition of “beneficial owner” includes anyone who passes the ownership test or anyone who passes the vaguely worded “substantial control” test.

A beneficial owner who owns or controls 25% or more of the ownership interests of the entity. This may also include potentially not yet realized ownership interests.  An “applicant” is defined as the person who files an application to form the entity. That can be you, your assistant, an employee, or your lawyer.

If you are not sure who is an applicant or beneficial owner, you might want to consider speaking with an experienced attorney who can evaluate and advise you with respect to relevant legal issues and the potential implications of the Corporate Transparency Act.

Will I get a notice from FinCEN with a QR code or a URL to report?

If you get correspondence purporting to be from FinCEN asking you to click on a URL or scan a QR code, IT IS A SCAM. FinCEN will not send unsolicited requests to you to fill out any compliance paperwork.

Where do I file information for the Corporate Transparency Act?

FinCEN is now taking Beneficial Ownership Information reports (BOI reports), and you may file them by using the secure filing system and forms at https://boiefiling.fincen.gov/. There is no fee to file these reports.

How do I file to comply with the Corporate Transparency Act?

You can submit the report on your own (filers may be the owners themselves or anyone acting on the behalf of business), or you can use the assistance of a legal or accounting professional. If you are filing your BOI yourself, you can find additional guidance here. Here’s how to file:

1.      Determine whether you are filing online or via PDF (this article will advise you on how to file online) and click the appropriate link

2.      Make a copy of your identification document and save it as a .pdf or .jpg.

3.      Have all your company, beneficial owner and applicant information ready.

4.      Fill in the application and receive the filing receipt.

5.      Check out the video tutorial here where I show you exactly how to file if you need help!


What if I don’t apply?

There are civil and criminal penalties if you don’t comply. Willful violations of the Corporate Transparency Act can be punished by civil penalties of up to $500 PER DAY for each day the violation continues, as well as up to 2 years of imprisonment and a fine of up to $10,000. Both individuals and corporations can be held liable for willful violations.  

Stay in compliance with the Corporate Transparency Act with Grabbe Law

If you are unsure whether you are required to file as a reporting company, who to report as either applicants or beneficial owners, or would just rather we handle the filing for you, let us know! Grabbe Law Office regularly assists Kansas businesses in navigating the complex laws to ensure that their businesses stay in compliance and are protected under the law.  Get started today by scheduling your free 15 minute business discovery session and pick a time that works for you.

 

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Julie Grabbe

Julie Grabbe

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