Who is FinCen?
The Corporate Transparency Act (CTA) was enacted as part of the National Defense Act in 2021. The CTA mandates that entities report their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN).
Am I Impacted?
Yes, if you are the beneficial owner of a domestic and foreign entity which has filed formation or registration documents with a U.S. state. These entities are referred to as reporting companies. An easy way to determine if you may need to file? If you are the owner/officer of an entity which has articles of incorporation or articles of organization on file with the Secretary of State’s office in your state of residence? You may well need to file.
When Do I File?
For entities created/registered after December 31, 2023, filing must take place within 30 days of entity creation. For the rest of us who have been in business for a while, the filing deadline is January 1, 2025. This means that we have some months to determine how and whether the rules apply to us.
What Information Must I Share?
The basics. Which includes full legal name, business address, governing jurisdiction (state of formation) and Tax ID of each reporting company. Further, each reporting company must include the name, date of birth, and home address for each of the beneficial owners.
Am I A Beneficial Owner?
Perhaps. If you exercise substantial control over the reporting company, or own or control at least 25% of the reporting company’s ownership interest, you are deemed a beneficial owner.
Could I Be Exempt?
It’s possible though unlikely. There are two basic exemption categories. First is type of business. Those businesses in the utility and financial sector are generally exempt. The reason? The amount of regulatory scrutiny to which they are subject, and the reams of information already collected on “beneficial owners”, far exceeds the reporting requirements under this new rule.
The other exemption is based on size. Companies who have at least 20 full-time employees, $5 million in revenue, and a physical office in the U.S are generally exempt from reporting requirements. And finally, there is an exemption for inactive entities.
What Action Do You Take?
Regulators would suggest that most of us could complete this filing on our own. CPAs, by virtue of their specialties and work, are generally well-equipped to interpret regs and file such documents. We use external compliance and filing specialists for all our federal filings.
Disclaimer
Note that this content is a very brief summary of the new reporting requirements. And we urge you not to depend on it to make a decision as to whether you must file under the new reporting requirements. If you would like to talk through whether these reporting requirements apply to you and your companies, you are more than welcome to reach out to schedule a time for us to talk.
Our Take
We choose to believe that this legislation and the resulting regulation was well-intentioned. Like all such legislation and so many things in life, there is something called “The Law of Unintended Consequences”. Based on the history of U.S. governance, we have no reason to believe that this information will be used exclusively for its stated purpose. And that assumes no ill-intent, intentional leaks, or abuse of privilege with this information. So, color us skeptical.
However, if you are subject to the referenced reporting requirements, we encourage you to file. We aren’t overly concerned about the ever-growing presence of the government in our lives, as we firmly believe the government doesn’t control our destiny.
Until we see you again, wishing you only the best.