On January 1, 2024, the Corporate Transparency Act (CTA) went into effect. Your business may have to comply. Failure to comply carries severe monetary and criminal penalties.
Unfortunately, Sheehan is unable to file any reports your business may need under the CTA as this has been deemed unlicensed practice of law and puts us at risk with our malpractice carrier. Depending upon your business structure, the time involved to complete the reporting process could be as little as 10-15 minutes.
What is the CTA?
The CTA requires private, unregulated companies to report information about “beneficial owners”– those who own at least 25% of or exercise substantial control over the reporting company, to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
The law closes a loophole in federal corporate regulations that enables criminals to hide their identities using shell companies. It is explicitly designed to combat money laundering, tax fraud, and terrorist activities. However, the legislation affects many American small businesses, including family offices, independent contractors, and limited liability companies (LLCs).
What are the requirements?
All entities formed or registered to do business in the United States will need to do one of the following: 1. Confirm that they qualify for an exemption from the CTA reporting requirements, OR
2. Timely submit a beneficial ownership information (BOI) report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
Under the CTA, what is considered a “reporting company”?
A reporting company includes all entities, unless an exemption applies (see below), that are formed or registered to do business in the United States by filing a document with a Secretary of State or similar office, this including corporations, LLCs, and LLPs. If an entity is not created by a state filing (such as certain general partnerships and most trusts), that entity is not subject to the CTA.
What types of entities are exempt from the CTA reporting requirements?
There are 23 listed exemptions. These include:
• Large operating companies with a presence in the United States, having more than 20 full-time U.S. employees and reporting more than five million U.S. dollars in revenue from U.S. sources on a consolidated basis to the Internal Revenue Service in the previous year.
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• Nonprofits, political organizations, and certain exempt trusts.
• Regulated enterprises such as public companies, insurance companies, banks, regulated investment companies, and other entities subject to regulatory oversight.
• Subsidiaries wholly owned by exempt entities.
If the entity is deemed exempt by any of the listed exemptions (see https://fincen.gov/boi for additional exemptions), no further action is required.
What are the reporting requirements?
Each reporting company will be required to submit a BOI report to FinCEN. E-Filing is available on FINCEN's website (https://fincen.gov/boi). Each BOI report must disclose required information about the reporting company (name, address, taxpayer identification number) and its “beneficial owners” and “applicants” (full legal names, date of birth, address, and passport or driver’s license number, and upload an image/photocopy of such documents).
Who are considered an entity’s “beneficial owners” and “applicants”?
• A beneficial owner is any individual who directly or indirectly either:
a. Exercises “substantial control” over the reporting company (such as the CEO, CFO, or other officer) or b. Owns or controls at least 25% of ownership interests.
• Applicants include a maximum of two individuals: (1) the person who directly files the formation or registration document of the reporting company and (2) the person who was primarily responsible for directing such filing. However, entities formed before January 1, 2024, will not need to provide information about their applicants.
What is the timeline for compliance for reporting companies?
Existing entities formed before January 1, 2024, have one year, until December 31, 2024, to file their initial BOI report. After the initial BOI report, no annual or quarterly filing is required unless there is a change to the previously reported information – including change in ownership, change to beneficial owner’s name, address or identifying number, including issuance of a new driver’s license or passport if previously uploaded. Such changes will require an amendment to be filed in 30 days. New entities created on or after January 1, 2024, must file their initial BOI report within 90 days of formation.
What are the penalties for non-compliance?
The CTA provides civil ($500 per day for failure to file or filing an incomplete report) and criminal penalties (up to $10,000 and two years imprisonment) for willfully providing false information, failing to provide complete information, or failing to update information.
Questions
If you have questions regarding the CTA and its impact on your business, please contact your service team at Sheehan.
Corporate Transparency Act Service Providers
Local Attorneys
Rachel L. Partain Forchelli Deegan Terrana
333 Earle Ovington Blvd., Suite 1010
Uniondale, New York 11553
Phone: 516-248-1700
E-Mail: rpartain@forchellilaw.com
WWW.FORCHELLILAW.COM
Lee Schwartz
Schwartz Ettenger, PLLC
445 Broad Hollow Road, Suite 205
Melville, New York 11747
Phone: 631-777-2401
Email: LAS@selawny.com
www.schwartzettenger.com
Other service providers:
Hubco Incorporation services
Fincen Fetch