Understanding the Corporate Transparency Act - What every business owner needs to know
The Corporate Transparency Act was signed into law with the aim of combating illicit financial activities. Its primary focus is to enhance corporate transparency by requiring companies to disclose beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). Beneficial ownership refers to the individuals who directly or indirectly own or control a company.
1. Reporting Requirements: Under the CTA, most corporations and limited liability companies (LLCs) are obligated to report their company information AND their beneficial ownership information (BOI) to FinCEN.
a) Reporting Company Information:
· Full legal name of the company;
· Any and all trade names or fictitious names;
· Principal business address;
· State, Tribal, or foreign jurisdiction of formation; and
· Internal Revenue Service (IRS) Taxpayer Identification Number (TIN) (including an Employer Identification Number (EIN)).
b) Reporting Beneficial Ownership/Company Applicant Information:
· Full legal names;
· Residential addresses;
· Dates of birth;
· Unique identification numbers of beneficial owners (i.e. a Passport or Driver’s License); and
· A scan of unique identification documents.
2. Definition of Beneficial Owners: The act defines beneficial owners as individuals who, either directly or indirectly, exercise substantial control over a company or own at least 25% of its ownership interests.
3. Definition of Company Applicants: The act defines company applicants as the individual who physically submits that documentation to your Secretary of State.
If you used a law firm, like Wheeler Legal, PLLC to form your business entity, then whoever filed on your behalf would be listed as your company applicant. In this circumstance, this person is NOT responsible for filing the BOI report or making sure that it is filed by someone else.
4. Confidentiality and Security Measures: While the CTA emphasizes the importance of transparency, it also addresses concerns related to privacy and security. The disclosed information will be treated with confidentiality, and stringent measures are in place to protect against unauthorized access and misuse.
What does this mean for Business Owners?
Most businesses will be required to file as there are few circumstances that qualify for exemption. We’ve included some helpful information below so you can prepare ahead of the New Year.
1. Important Dates:
· Businesses formed before January 1, 2024: You have until January 1, 2025 to file your BOI Report.
· Businesses formed on January 1, 2024, but before January 1, 2025: Once you receive your Articles from the State, you have 90 calendar days to file your BOI Report
· Businesses formed on or after January 1, 2025: Once you receive your Articles from the State, you have 30 calendar days to file your BOI Report
2. Important Steps:
· Filing will only be open beginning on January 1, 2024 so we’re not sure what the filing process will actually look like until then. Gather all your required elements now and be prepared to file next month.
· Obtain an Internal Revenue Service (IRS) Taxpayer Identification Number (TIN) (including an Employer Identification Number (EIN)). You can apply and instantly receive your TIN/EIN online. o IRS Website: Apply for an Employer Identification Number (EIN) online | Internal Revenue Service (irs.gov)
· File your BOI Report. Filing directly on the government site is free. However, there are third-party sites that offer assistance with filing. o Government Website: https://www.fincen.gov/boi o Third Party Website: https://fincenreport.com/fincen-report-for-business-owners/
· This is a ONE time filing. You do not need to file a BOI report each year. However, you will need to update or amend your initial report should certain information change.
Disclaimer: The information contained in the above post is provided for general informational purposes only, and does not constitute legal advice, nor is it intended to create an attorney-client relationship. This firm aims to provide quality information, but we make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of the information contained in or linked to this post. Nothing provided in these blog posts should be used as a substitute for the advice of competent counsel.
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