Corporate transparency Act

Corporate Transparency Act

The Corporate Transparency Act, which became effective January 1, 2024, aims to enhance transparency in corporate structures by requiring certain companies, including LLCs, to disclose the person or persons who exercise ownership or substantial control of the entity, known as Beneficial Ownership Information.

 

This legislation was enacted with the goal of preventing money laundering, fraud, and other illicit activities, as it enables law enforcement agencies to access accurate and up-to-date information about the individuals who ultimately control and benefit from these entities.

 

As your trusted partners, we want to ensure that you are well-informed about the implications of this new law and the steps required for compliance. The key points to note are as follows:

 

  1. Beneficial Ownership Reporting: The Act mandates that certain corporations and LLCs disclose information about their beneficial owners, defined as individuals who directly or indirectly control at least 25% of the ownership or voting interests in the company, OR exercise substantial control over a reporting company. This means “Beneficial Owners” includes individuals who: (1) are senior officers, (2), have the authority to appoint or remove officers or directors, (3) are important decision-makers for the company, or (4) have other form of substantial control over the company.
    1. Substantial control also includes those who have rights to purchase or sell shares, even if such right is a debt.
    2. Substantial control also includes individuals who control one or more intermediary entities that separately or collectively exercise substantial control over a reporting company.
    3. Substantial control can be varied. If you are at all unsure about who in your company must be reported as an owner, you should speak with legal counsel.

 

  1. Reporting Requirements: Companies are required to submit this beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) through a confidential database. The submitted information will be accessible only by authorized government agencies for law enforcement and national security purposes.

 

  1. Reporting Deadlines. Currently, any reporting company created before January 1, 2024 must report by January 1, 2025, and LLC’s created on or after January 1, 2024 must report with in 90 days of the start of the LLC. Moving forward, entities created after January 1, 2025 will have 30 days to make this filing.
  2. Potential Penalties. Failure to comply with the reporting requirements may result in significant penalties. It is in the best interest of your company to take proactive measures to gather and submit the required information accurately and promptly.
  3. How We Can Assist: Our team is committed to supporting you through this transition. We can provide guidance on the steps to take, help you gather the necessary information, and ensure that your reporting obligations are met in a timely and accurate manner. We may be able to file the reports for you, with your permission, and upon your request. The fee to cover our time for this depends on the type and number of organizations of which you are an owner.
  4. Some entities are exempt from reporting. We’ve highlighted some of the terms of the major exemptions, however, this is not an exclusive list. If you believe you may be exempt but would like further verification, please call our office to schedule a consultation.
    1. Securities reporting issuers, banks, credit unions, money service businesses, etc.
    2. Insurance companies, accounting companies
    3. Public utilities
    4. Large operating companies – defined as an entity that employs more than 20 full time employees in the United States AND files a federal incomes tax return for the previous year for more than $5,000,000 (Excluding foreign sales) in gross receipts or sales on the entity’s IRS Form 1120, IRS Form 1065, or applicable IRS Form.
    5. Subsidiaries of certain exempt entities, such as governmental authorities and tax-exempt entities
    6. Inactive entities. Some, but not all, of the factors that are used to define an inactive entity included: those not engaged in active business, which have not had any change in ownership in the preceding 12 months, and have not sent or received funds in an amount greater than $1,000.00 in the preceding 12 months, and those that do not hold any kind or type of assets, in the U.S. or abroad, including ownership interest in another entity
    7. Entities assisting a tax-exempt entity

 

The report can be found at boiefiling.fincen.gov. The report can be submitted online at one time or by PDF, online.

 

The person filing the report will need to upload a copy of identification, such as a state-issued driver’s license, for each beneficial owner, and other identifying information about that individual.

 

At EQUES® Law Group, we understand that compliance with new regulations can be challenging, but we are here to navigate this process together. If you are a current client of the firm, feel free to call your attorney on record to consult on this process. If you are not currently a client of the firm, and have any questions or concerns, please call our office to set up a consultation at 1-844-My-EQUES.

 

Moriah Hinton
Attorney
EQUES Law Group

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