The Beneficial Ownership Reporting Process Created By The Corporate Transparency Act
In an effort to combat the use of shell companies and creative ownership structures to hide improper financial transactions, Congress passed the Corporate Transparency Act in 2021 on a bipartisan basis. As a result, the Financial Crimes Enforcement Network of the U.S. Treasury (FinCEN) will begin to collect information about the “beneficial ownership” of U.S. companies. Beneficial ownership refers not just to actual owners of a business entity, but rather to the entire group of individuals who directly or indirectly own or control a business. Beginning in 2024, companies will need to file an initial beneficial ownership reporting form, unless they are exempt, and must file updates when applicable.
Is my business required to file a Beneficial Ownership Reporting Form?
Companies that are required to fill out a Beneficial Ownership Reporting Form are called reporting companies. These include (i) domestic corporations, limited liability companies and any other entities that were created by the filing of a document with a secretary of state or other similar office in the United States, or (ii) companies formed outside of the United States that has registered to do business in the United States by filing a document with a secretary of state or other similar office in the United States. Some entities are exempt from filing, including large operating company, certain financial institutions, inactive companies, governmental authorities, accounting firms, public utilities and tax-exempt organizations. The complete list of exempt entities can be found in FinCEN’s Small Entity Compliance Guide available at: https://www.fincen.gov/boi/small-entity-compliance-guide.
Who qualifies as beneficial owners?
Beneficial owners are those individuals that either directly or indirectly exercise substantial control over the reporting company or own or control at least twenty-five percent (25%) of the ownership interests of such company. Individuals that are deemed to exercise substantial control include senior officers (such as the company’s president, CEO, COO, CFO, general counsel or similar officers), individuals with the power to appoint or remove certain officers or a majority of the board (or similar setup for a LLC), important decision makers, and other individuals that exercise substantial control (meant to act as a catch-all to avoid creative avoidance of the reporting requirements). Five exceptions exist to the requirement to provide information about beneficial owners including for minor children, employees of the reporting company under certain circumstances, creditors, owners by right of inheritance and custodians or agents.
What information is required to file the Beneficial Ownership Reporting Form?
Reporting companies will be required to disclose the company name, any trade names, its jurisdiction of formation and Tax ID number. Beneficial owners will be required to provide their name, date of birth, residential address and an identifying number from a passport or State issued driver’s license or identification card (as well as a photo of such document). For companies created or registered on or after January 1, 2024, reporting companies will also be required to disclose the company applicant which is the individual who directly files the documents registering the company or the person primarily responsible for such filing.
How do I file the Beneficial Ownership Reporting Form? Do I need an attorney or CPA to assist me?
The Beneficial Ownership Reporting Form can be filed using a PDF form uploaded to the FinCEN filing portal, or an electronic reporting form can be completed. To file the Beneficial Ownership Reporting Form, visit: https://boiefiling.fincen.gov/fileboir. An attorney or CPA is not required to file the Beneficial Ownership Reporting Form; however, the advice of a qualified professional, such as the attorneys at Crabapple Legal PC, can help companies ensure that they are fully in compliance with the reporting requirements.
Is there a fee from the government for the filing of the Beneficial Ownership Reporting Form?
No. There is no fee to file the Beneficial Ownership Reporting Form.
Where can I find out more information about the beneficial ownership reporting process?
The Small Entity Compliance Guide contains answers to many questions regarding the beneficial ownership reporting process and can be found at: https://www.fincen.gov/boi/small-entity-compliance-guide. For more information about how Crabapple Legal PC can help your company comply with the requirements of the Corporate Transparency Act and complete the filing of the Beneficial Ownership Reporting Form, please email Jamie Hernan by clicking HERE or call us at +1 (678) 261-4000.
More about Crabapple Legal PC
Crabapple Legal offers expert, on-demand general counsel services for entrepreneurs, start-ups and businesses of all sizes. Attorneys Adam Haigh and Jamie Hernan each have over twenty-three years of experience helping companies form, grow and eventually sell. More information is available at: https://crabapple.legal. Set up a free phone or video consultation to discuss the Beneficial Ownership Reporting Process or your other business legal needs.
Crabapple Legal – You Do Business. We Do Legal.
Disclaimer: This information is provided as general informant and should not be considered legal advice. The use of this information does not create any attorney client relationship and should not be considered the offering of legal advice, particularly in jurisdictions in which the attorneys of Crabapple Legal are not licensed. Do not rely on this information as legal advice. A written engagement agreement Crabapple Legal and a prospective client are a necessary condition precedent to the creation of an attorney client relationship and the ability of a client to rely on provided information as direct legal advice. No guarantee is provided as to the current validity of the information contained in this post. External links are provided as a matter of convenience and Crabapple Legal is specifically not responsible for the content of any linked websites.