There are new CTA requirements.

As of January 1, 2024, a new federal filing requirement known as the US Corporate Transparency Act (CTA) requires Corporations, Limited Liability Companies, Limited Partnerships, and other similar entities to disclose beneficial ownership information to the U.S. Treasury Department.

The rules are broad and intended to encompass many legal entities, including smaller legal entities. If your entity is required to submit a CTA report, there are potentially severe penalties that may be assessed for failing to do so within the compliance deadlines, including fines, civil penalties, and criminal penalties. Thus, we strongly encourage you to designate a trusted person in your business to review this letter, research and understand the CTA’s application to your company, and be prepared to file the CTA Report well before your company’s filing deadline.

Please do not hesitate to contact us at Beyer, Brown and Rosen for help or questions on this.

Additional information:

The Corporate Transparency Act (“CTA”), which enacts a new federal filing requirement for many business entities, became effective on January 1, 2024. The CTA was enacted as part of the Anti-Money Laundering Act of 2020 to provide Federal and State enforcement agencies with more comprehensive information about small and shell companies to help control money laundering and terrorist financing activities. The database of information provided by the CTA Reports will not be available to the general public but will be accessible by Federal and most states’ criminal and financial law enforcement agencies.

In general, the businesses subject to the CTA requirements, called the Reporting Companies, are required to report specified information about the Reporting Company and the Reporting Company’s information owners to the Financial Crimes Enforcement Network.

Businesses subject to the CTA reporting requirements are those set up as a Corporation, Limited Liability Company, Limited Partnership, certain types of business trusts, as well as a few other types of uncommon entities. General partnerships and Sole Proprietorships are NOT subject to CTA reporting requirements. As smaller businesses are the focus of the CTA, a business that meets ALL THREE of the following criteria will NOT be required to file a CTA Report:

1. the business reported over $5 Million in gross revenue on its last filed U.S. Tax return;
2. the business has more than 20 full-time employees in the U.S.;
3. the business has an operating presence at a physical office in the U.S.

The CTA requires all business entities that are not exempt to file a Beneficial Ownership Information Report (BOIR). These reports will be filed electronically with FinCEN, a division of the U.S. Treasury Department, on the BOIR website which can be found at: https://boiefiling.fincen.gov/fileboir

There is no charge for filing a BOIR or an amended BOIR on your own. The deadline for a Reporting Company to file its initial BOIR is dependent on when the Reporting Company was created.

If the Company was created prior to January 1, 2024, then this report must be filed no later than January 1, 2025.

If the company was created after January 1, 2024, but before January 1, 2025, the report must be filed within 90 days of formation, or of the date of receiving notice that the filing of the company has been recorded by the Secretary of State.

Next year, in 2025, any business that files documents to start a required Reporting Company must file the report within 30 days of formation, meaning 30 days of receiving notice that the filing of the company has been recorded by the Secretary of State.

If information in the BOIR changes or is out-of-date, each Reporting Company is required to file a new BOIR within 30 days with accurate and current information. This would be if ownership changes, company information changes, or if owner information changes.

This information includes the full company name, any trade names or DBAs, principal address, and IRS taxpayer identification number. In addition to the Reporting Company’s information, the BOIR must also include the specified personal information of the Reporting Company’s ownership, each referred to as a “Beneficial Owner”.

The information required to be reported for each Beneficial Owner is such individual’s full name, date of birth, residential address, and government-issued identification. An individual qualifies as a Beneficial Owner if they 1) directly or indirectly own more than 25% of the equity of the Reporting Company or 2) have substantial control of the Reporting Company. Individuals with substantial control may include officers, managers, directors, equity, share, or interest holders with preferential rights in the Reporting Company, or others with effective control over the Reporting Company. For newly formed Reporting Companies, specific personal information must also be provided for individuals directing the formation of the Reporting Companies.

Please note that if your company is required to file a BOIR there are potentially severe penalties that may be assessed, including fines, civil penalties, and criminal penalties. Thus, we strongly encourage you to designate a trusted person to review this letter, research and understand the CTA’s application to your company, and be prepared to file the BOIR well prior to your company’s filing deadline.

Options for Filing the BOIR report:

1. File the report yourselves on line at https://boiefiling.fincen.gov/fileboir
2. Have us file the reports. There will be a charge for this service. Call Christopher if you would like more information on this.
3. See if your CPA is providing this service and have them take care of it.

Doing nothing is not an option.

If you have any questions relating to the CTA or need assistance in determining how to prepare for this new filing requirement, please do not hesitate to contact us at Beyer, Brown, and Rosen PLC. (916) 645-9529 or cbeyer@bprlaw.net.