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The Corporate Transparency Act (“CTA”), enacted in 2021, goes into effect on January 1, 2024. The CTA was enacted to combat illicit activity, such as tax fraud, money laundering and financing of terrorist activities.  Most entities and closely held businesses organized or operating in the United States will be required to file information about the entity and the individuals who own or control these entities with the Financial Crimes Enforcement Network (FinCEN).  Each Reporting Company must file a Beneficial Ownership Information report (“BOI report”) with FinCEN detailing the Beneficial Ownership of the Reporting Company and its Company Applicants.

What entities are required to report?

All Reporting Companies must comply with the CTA.  Subject to limited exemptions, “Reporting Companies” include all legal entities registered to do business in the United States, including corporations, limited liability companies, partnerships, certain types of trusts, and any other type of entity that is registered or formed by a filing with a secretary of state’s office or similar state agency.

What entities are exempt?

The CTA provides a number of exemptions from reporting, which generally apply to highly regulated businesses.  A few exemptions of note include entities such as insurance companies, registered investment companies, banks and certain tax-exempt entities.  Additionally, “large operating companies” with (1) at least 20 full-time employees, (2) an operating presence at a physical office within the U.S., and (3) more than $5,000,000 in annual gross sales are exempt.

What information is required in a BOI report?

A Reporting Company must include certain information in its BOI report for each Beneficial Owner and up to two Company Applicants.

“Beneficial Owners” are individuals who: (1) directly or indirectly, exercise substantial control over the Reporting Company, or (2) own or control 25% or more of the ownership interests of the Reporting Company.

Only Reporting Companies formed on or after January 1, 2024 must report Company Applicants. “Company Applicants” are individuals who: (1) directly file the document that creates the entity, or the document that registers the entity to do business in the United States, and/or (2) are primarily responsible for directing or controlling the filing of the relevant document.

A Reporting Company when filing their BOI report must include the Reporting Company’s: (1) full legal name, (2) any trade name or “doing business as” name, (3) the current street address or principal place of business, (4) the jurisdiction of formation or registration, and (5) Tax Identification Number (TIN).

In addition, the Reporting Company must provide the following information for each Beneficial Owner and Company Applicant: (1) full legal name, (2) date of birth, (3) residential street address, (4) unique identifying number and issuing jurisdiction from a non-expired qualified document such as a passport or a driver’s license, and (5) an imagine of the identifying document.

Where to file the BOI report? Will the BOI report be kept confidential?

Reporting Companies can begin filing their BOI reports on January 1, 2024 online at the following link: https://www.fincen.gov/boi

The reported information will be stored on the Beneficial Ownership Secure System (BOSS). The reported information will not be available to the public.

When is the deadline to file a BOI report?

Reporting Companies formed before January 1, 2024 must file a BOI report prior to January 1, 2025.

Reporting Companies formed on or after January 1, 2024, but before January 1, 2025, must file a BOI report within 90 days after formation.

Reporting Companies formed on or after January 1, 2025 must file a BOI report within 30 days after formation.

A Reporting Company must also file an updated BOI report within 30 days after the occurrence of a change in a Reporting Company’s (1) general information, (2) Beneficial Owners, or (3) status as a Reporting Company (i.e., becoming eligible for an exemption).  However, in the event of termination or dissolution of a Reporting Company, an updated BOI report is not required.

What is the penalty for non-compliance?

Individuals and Reporting Companies are subject to civil and/or criminal penalties for not complying with the CTA requirements, including fines of up to $500 for each day a violation continues or up to two years imprisonment, or both.

Please contact Mallery s.c. if you have any questions concerning the CTA.

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