Biz Owners - You Need to Know About the New Corporate Transparency Act

If you have a small business you have a new filing requirement in 2024 and unfortunately if not followed there are *HUGE financial and criminal consequences.* I don’t want that for anyone, so please read on.

Background

The Corporate Transparency Act became effective on 1/1/2024. The reason for this law is that Congress is concerned about money laundering, particularly through “shell companies” and layering of LLCs. This new law requires direct or indirect owners and/or those who have substantial control over certain entities to be reported so the government has records within a national database.

WHO THIS APPLIES TO

• LLC

• Corporations (S or C)

• LLP

• LLLP

• LP

Basically any entity where it was created by filing with a secretary of state or similar office. This applies to both domestic and foreign entities (none of my clients to my knowledge have foreign entities but it’s worth noting just in case 😀)

WHO IT DOES NOT APPLY TO*

• Sole props (unless LLC)

• Rental properties (unless LLC)

• General partnerships (unless LLC) 

• Grantor, charitable and irrevocable trusts

*unless state requires filing for creation

EXEMPTIONS (those not required to file)

• LARGE COMPANIES - must meet the following 3 requirements:

1. More than 20 full time employees in the United States (as of the day you submit)

   • Full time = 30 hours weekly or 130 hours monthly 

2. Have physical office in the US 

3. Prior year US tax return reflecting sales of $5M+

• Note: Combining controlled groups is not allowed (you can’t combine companies to meet #3)

• Entities 100% owned by large Companies above are also exempt, but only if 100% owned by large companies 

• NON-PROFITS

• Entity is ALREADY REGISTERED/reporting (stock brokers/filing with SEC for example) 

• PCAOB accounting firms 

• Securities-related companies 

• Insurance companies 

• Utilities 

• Most Banks

• Subsidiaries of exempt entities, but only if 100% owned by exempts

• INACTIVE ENTITIES EXISTING ON OR BEFORE 1/1/20 & <$1,000 in transactions in the last 12 months

*IMPORTANT* DEADLINE TO FILE

• If entity was created BEFORE 1/1/2024, file by1/1/2025 

• If created on or AFTER 1/1/2024, file within 90 days of formation

THERE ARE NO EXTENSIONS

CONSEQUENCES IF YOU DON’T

• $500 per day

plus….

• $10,000 in criminal fines

plus….

• 2 years in prison

= HOLY FLUFF! I’m just going to leave this here. File. When in doubt…file.

WHAT TO REPORT (pay attention to WHO you have to report)

THE FOLLOWING INDIVIDUALS 

• Beneficial owners OR Exercises Substantial Control 

1. Directly or indirectly owns or controls at least 25% 

• Automatic Reporting Required For:

1. Senior Officers (President, VP, Treasurer)

2. General Counsel

3. Board Members

4. >25% stockholders or members or joint owners 

5. Basically major decision makers 

6. & trustees or beneficiaries

• Applicant 

1. Only if formed after 1/1/2024 - must report who filed the creation documents for the entity 

You will need to report the following for individual(s) that meets the above criteria

• Name

• Birthdate

• Address 

• Unique Id number from a *non-expired* passport or driver's license, plus an image of one of these 

• OR may obtain FinCEN ID

***The company you are filing the report for reports that FinCEN ID in lieu of the above which can simplify the process. If you may in the future have to be reported on by more than one company I would imagine just providing the ID# would be so much easier.  The identifier may be issued to individuals for Beneficial Ownership, or companies for Applicant reporting.***

Additional information that needs to be reported on the form (the easy part)

• Company Name

• Address (no PO boxes)

• EIN

OTHER IMPORTANT INFORMATION (Fees & ongoing requirements)

There is no fee to file the form.

You file this form once. There is no annual filing requirement, however if anything changes you have 30 days to update by filing an updated report. Changes include:

1. Ownership

2. Beneficial ownership

3. Address Change

4. Name or ID change

Because of this, I will be starting to have my clients file in October 2024 (unless the entity is started in 2024 then within 90 days) so there are fewer months to track these changes. Once you file, this 30 day requirement starts AND of course there is potential for law changes from now until then.

How to File - FINCEN

1. Go to FinCen (financial crimes enforcement network) https://www.fincen.gov/boi

2. Obtain a FINCEN ID (if you want one)

3. Then file online or download the form (recommended so you can check your work)

*Anything with a red asterisk must be filled out

Upon completion go to fincen.gov/boi 

1. Click on “File a report using BOI E-Filing System”, then 

2. Click on BOI E-Filing “Get Started”, then 

3. Under File PDF BOIR, click on “Submit BOIR”

They are a little nice here - they are giving you 90 days to fix any errors with newly filed forms 🙂

FAQ

Who will have access to this information? Great question and a few on this list, particularly the last few are concerning:

• Federal Law Enforcement, Security & Intelligence 

• State/Tribal Enforcement 

• Local law enforcement 

• US Treasury officers and employees 

• Financial institutions and their regulators anywhere in the world 

• Judges, prosecutors 

• Foreign law enforcement, judges & prosecutors 

• Casinos & Money Service Businesses

in conclusion

Trust me, I get it. As a small business owner, all you need is one more thing on your plate. I can’t control the government, but I can inform and give you the information needed to ensure you report (if you are required to do so) and avoid the crazy consequences. Go, get your FINCEN ID and make a list of all the entities you own or have control in and go file on time!

Lastly, beware of fraud. If someone offers to prepare for free - watch out!