Kaufman is a lawyer in Carlsbad and lives in Irvine.
On January 1, 2024, the Corporate Transparency Act came into effect. The Corporate Transparency Act requires certain entities to file beneficial ownership information reports with the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Department of the Treasury. The purpose of the Corporate Transparency Act is to make it more difficult for bad actors to hide financial transactions through shell companies and complex ownership structures. Small business owners are unknowingly affected by this new law because it applies regardless of the value of their business.
Companies that are required to report under the Corporate Transparency Act include limited liability companies (LLCs), limited liability partnerships (LLPs), Includes incorporated legal entities and business entities. of nations or “Indian tribes” and certain foreign corporations. There are 23 exceptions to the reporting requirements, meaning certain types of companies do not have to report. Generally, publicly traded companies, nonprofit organizations, and certain large business corporations are exempt from reporting. To determine whether your company needs to be reported, the Financial Crimes Enforcement Network has created a checklist that can be found on its website.
If a company is not exempt from reporting, the company must report its full name, trade name or “doing business name” (dba) name, full U.S. address, state, Indian tribe, or foreign jurisdiction in which the company is incorporated. there is. , the state or Indian tribe of first registration of the foreign reporting company, and the IRS Taxpayer Identification Number/Employer Identification Number.
In addition, each beneficial owner of a company (a person who exercises effective control over the company, such as a president or executive officer, or who owns or controls at least 25 percent of the company) must report the name and date. there is. Date of birth, address, its identification number, and issuing jurisdiction, such as driver's license number. Additionally, individuals must submit a photo of their U.S. passport, driver's license, or other government-issued identification.
In some cases, a person who is considered a beneficiary may be exempt from reporting.
If your company was established or registered after January 1, 2024, you will also need to report on your company applicant. A company applicant is a person who directly submits documents to establish or register a company. If more than one person participates in the application, the individual with primary responsibility for directing or managing the application. So, for example, if your attorney filed the documents forming your company, your attorney is the applicant for the company and should be included in your report.
The required information must be reported electronically on the Financial Crimes Enforcement Network website at fincen.gov/boi. Once you complete your report, be sure to save your network submission confirmation.
Reporting requirements vary depending on when the company was incorporated or registered. According to the Financial Crime Enforcement Network, you should report:
If your company was established or registered before January 1, 2024, you must report by January 1, 2025. If the company is incorporated or registered in 2024, it must be reported within 90 calendar days of receiving notification that the company has been incorporated. If your company was incorporated or registered on or after January 1, 2025, you must report within 30 calendar days of receiving notification that your company's incorporation or registration is valid. Updates or corrections to beneficiary information previously submitted to the Financial Crimes Enforcement Network must be submitted within 30 days.
There is no annual reporting requirement. After submitting an initial report, companies only need to submit additional reports to update or correct information.
If a company fails to report, the Financial Crimes Enforcement Network can assess fines of $591 per day (up to $10,000) and possible criminal penalties.
