Floyd Norrick
Congress adopted the anti-money laundering act of 2020 and the Corporate Transparency Act (CTA) as a part of it. The purpose of the acts is as suggested in the titles – to combat money laundering, combat financing of terrorism and to detect other financial criminal activity. A financial crimes enforcement network (“FinCEN”), a division of the U.S. Treasury, is charged with enforcing the CTA.
As a result of the CTA the Department of Treasury issued rules that are effective January 1, 2024. These rules require beneficial ownership information (“BOI”) to be reported by many previously unregulated business entities, as well as certain individuals who exercise substantial control of those entities. Is your company affected? Are you?
Generally, a “Reporting Company” is a company that was organized by filing documents with the Secretary of State (Corporations, LLC’s, etc.), and Reporting Companies are required to file a BOI with the FinCEN. Some companies are exempted, generally companies that are already regulated and must file reports with similar information due to other federal regulations. There are numerous, however, exempt companies.
In addition to the Reporting Company, the (“Beneficial Owner”) and the “Applicant” for such company must also be included in the BOI report. A Beneficial Owner is (i) a person with substantial control, such as a President, CEO or other person performing similar functions, (ii) any individual with authority to appoint officers or a majority of directors of the reporting company or an individual who is a “important decision-maker”. As you might imagine, these terms are defined broadly.
An Applicant is the person who after January 1, 2024, files the documents with the Secretary of State to organize the business entity. The applicant includes not only the person/entity filing the documents, but also the person who is primarily responsible for directing the creation of the organizing documents.
The BOI includes for the Reporting Company its name, any d/b/a, its address, its state of organization, and its IRS issued TIN and EIN. For each beneficial owner or an applicant, the BOI includes their full name, date of birth, current address, and number from an acceptable identification document (Passport, Driver’s License, other state identification number or a FinCEN identification number.)
Business entities that were organized before January 1, 2024, must submit their BOI by December 31, 2024. Business entities organized in 2024 have ninety (90) days in which to submit the BOI, and business entities that are organized after 2024 must submit the BOI within thirty (30) days. Reporting Companies that willfully or knowingly fail to report or fail to report fully may suffer penalties.
The US Department of Treasury and FinCEN have not yet fully developed all of the forms that will be used to submit a BOI. When they are ready, the forms are expected to be made available directly by the US Department of Treasury or FinCEN. We presently understand there will be no charge for the forms, and no charge to submit the completed forms to FinCEN. We also understand that the U.S. Department of Treasury, IRS and FinCEN will not be contacting companies by telephone and email regarding these matters. People and companies who desire to obtain confidential information about your company or individuals within the company, however, may attempt to contact you by telephone or by email while pretending to be associated with the US Department of Treasury, IRS, or FinCEN. Be safe and protect yourself from fraud.
As you can see, your company and some individuals in your company may be affected by the CTA. We suggest that if you or your company may be affected by the CTA that you consult with your attorney about your obligations and, if you do not have an attorney, we encourage you to contact and meet with us to discuss the matter. We also encourage you to act timely.
https://www.fincen.gov/boi-faqs
https://home.treasury.gov/news/press-releases/jy2015
