In a significant step towards corporate transparency, the Corporate Transparency Act (CTA) has been enacted into law as part of the National Defense Authorization Act for Fiscal Year 2021. This new regulation aims to combat money laundering, terrorism financing, and other illicit activities by requiring the disclosure of information about the Beneficial Ownership information (BOI) of certain entities. As we approach the implementation period, it is crucial to understand the key aspects of this legislation.
Who Must Comply with the BOI Reporting Requirement?
Both entities organized in the U.S. and abroad may be subject to CTA reporting requirements. This includes corporations, limited liability companies (LLCs), and similar entities. However, some entities are exempt, such as publicly traded companies, banks, credit unions, and certain inactive entities, among others.
Who is Considered a Beneficial Owner?
The beneficial owner is any individual who exercises “substantial control” over a reporting entity or owns/controls at least 25 percent of the ownership interests in such entity.
Are There Exemptions from Reporting Requirements?
There are 23 categories of exemptions that apply to certain entities, including publicly traded companies, banks, credit unions, securities brokers/dealers, public accounting firms, and certain inactive entities, among others. It is important to note that these exemptions are not universal, and many of these entities are already heavily regulated by the government, disclosing their BOI information to a government authority.
Additionally, certain “large operating entities” are exempt from filing the declaration. To qualify for this exemption, the company must:
a) Employ more than 20 people in the U.S.; b) Have reported gross income (or sales) of more than $5 million in the previous year’s tax return; and c) Be physically present in the U.S.
Filing Deadlines and Types of Required Information
Filing deadlines vary based on the entity’s creation/registration date:
- New Entities (created/registered after 12/31/23):
- Must file within 30 days.
- There is a proposed regulation allowing new entities created in 2024 to extend the deadline from 30 to 90 days.
- Existing Entities (created/registered before 1/1/24):
- Must file by 1/1/2025.
- Companies Reporting Changes or Inaccuracies:
- Must file information within 30 days.
What Type of Information is Required to be Reported?
Companies must report the following information:
- Full legal name of the reporting company.
- Any trade name or “doing business as” (DBA) name.
- Business address.
- State or tribal jurisdiction of formation.
- IRS taxpayer identification number (TIN).
Additionally, information about the beneficial owners of the entity and, for newly created entities, the applying individuals/entities, is required. This information includes:
- Name.
- Date of birth.
- Address.
- Unique identification number and issuing jurisdiction of an acceptable identification document (e.g., driver’s license or passport).
- An image of such a document.
Access to Reported Information
BO information will be accessible to U.S. federal, state, and tribal agencies, as well as the Department of the Treasury, financial institutions, federal and state regulators, and foreign law enforcement agencies, among others.
Penalties for Non-Compliance
Understanding the consequences of non-compliance is crucial. Intentional failure to comply with the BOI reporting requirement may result in criminal and civil penalties.
With the imminent implementation of the Corporate Transparency Act, companies must prepare to meet filing requirements and ensure proper disclosure of information. Transparency has become a key pillar in combating illicit activities, and compliance with the CTA is essential for the integrity of the financial system.
For personalized guidance and to ensure compliance with all requirements, we invite you to contact us. You can reach us via WhatsApp at +1(305) 924 2374, email us at info@acmmconsulting.com, or complete the following FORM for consultation.
We are here to assist you in navigating these changes and ensuring effective compliance.
All the information provided in this article is for informational and reference purposes only. ACMM Consulting is not liable for any decisions readers may make without prior consultation with our professionals. Each business situation is unique, and we recommend seeking our advice before making important decisions. Contact us via WhatsApp at +1(305) 924 2374 or send an email to info@acmmconsulting.com to obtain personalized consulting plans to guide you in each specific case.
