Starting January 1, 2024, a significant number of businesses will be required to comply with the Corporate Transparency Act (“CTA"). The CTA was enacted into law as part of the National Defense Act for Fiscal Year 2021. The CTA requires the disclosure of the beneficial ownership information (otherwise known as “BOI”) of certain entities from people who own or control a company.  It is anticipated that 32.6 million businesses will be required to comply with this reporting requirement. The intent of the BOI reporting requirement is to help US law enforcement combat money laundering, the financing of terrorism and other illicit activity.  The CTA is not a part of the tax code. Instead, it is a part of the Bank Secrecy Act, a set of federal laws that require record-keeping and report filing on certain types of financial transactions. Under the CTA, BOI reports will not be filed with the IRS, but with the Financial Crimes Enforcement Network (FinCEN), another agency of the Department of Treasury.  Below is some preliminary information for you to consider as you approach the implementation period for this new reporting requirement. This information is meant to be general-only and should not be applied to your specific facts and circumstances without consultation with competent legal counsel and/or another retained professional adviser. 

What entities are required to comply with the CTA’s BOI reporting requirement? 
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‍Entities organized both in the U.S. and outside the U.S. may be subject to the CTA’s reporting requirements. Domestic companies required to report include corporations, limited liability companies (LLCs) or any similar entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe. 

‍Are there any exemptions from the filing requirements?
‍There are 23 categories of exemptions. Included in the exemptions list are publicly traded companies, banks and credit unions, securities brokers/dealers, public accounting firms, tax-exempt entities and certain inactive entities, among others. Please note these are not blanket exemptions and many of these entities are already heavily regulated by the government and thus already disclose their BOI to a government authority. In addition, certain “large operating entities” are exempt from filing. To qualify for this exemption, the company must:
a)   Employ more than 20 people in the U.S.;
b)   Have reported gross revenue (or sales) of over $5M on the prior year’s tax return; and
c)   Be physically present in the U.S. 

What sort of information is required to be reported? 
A reporting company must disclose the identity of each beneficial owner of the company and each company applicant. For each individual who is a beneficial owner or a company applicant, the reported information must include: full legal name; date of birth; residential street address; and an identifying number from an acceptable     identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of identification document. The reporting company must also provide an image of the identification document used to obtain the identifying number in item four.  

Who is a beneficial owner? 
Any individual who, directly or indirectly, either: 
a) Exercises “substantial control” over a reporting company, or
b) Owns or controls at least 25 percent of the ownership interests of a reporting company
An individual has substantial control of a reporting company if they direct, determine or exercise substantial influence over important decisions of the reporting company. This includes any senior officers of the reporting company, regardless of formal title or if they have no ownership interest in the reporting company. The detailed CTA regulations define the terms "substantial control" and "ownership interest" further.

Who is a company applicant? 
The company applicant is the person who actually files the document that creates or registers the reporting company (e.g., an attorney). Company applicants must provide the same information that is required of beneficial owners, but only if the reporting company is formed or registered after 2023. Because of the difficulty in tracking down information about company applicants for reporting companies that have been inexistence for several years, reporting companies formed or registered before2024 do not have to supply BOI for their company applicants. 
 
When must companies file? 
There are different filing timeframes depending on when an entity is registered/formed or if there is a change to the beneficial owner’s information. 
- New entities (created/registered in 2024) — must file within 90 days
- New entities (created/registered after12/31/2024) — must file within 30 days
- Existing entities (created/registered before 1/1/24) — must file by 1/1/25
- Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports — must file within 30 days 

Risk of non-compliance 
‍Penalties for willfully not complying with the BOI reporting requirement can result in criminal and civil penalties of $591 per day and up to $10,000 with up to two years of jail time. For more information about the CTA, visit www.aicpa-cima.com/boi.

Please contact our office at 636-573-1225 to discuss your business situation.