Corporate Transparency Act:

Guidance by Levenfeld Pearlstein

The new Corporate Transparency Act requires reporting of company ownership information to the U.S. Financial Crimes Enforcement Network (FinCEN).

The new Corporate Transparency Act applies to most business entities, including corporations, limited liabilities companies, and other entities formed by filing with a secretary of state or similar office. However, FinCEN allows a total of 23 exemptions. If you are unsure if you qualify, we can help you determine if FinCEN reporting requirements apply to your company.

Here is what you need to do…

Here is how LP can help…

Most clients can handle reporting themselves. Based on presently available information, this process should not be too burdensome or time-consuming for any single reporting company. However, clients with numerous legal entities may face administrative challenges. We are available to:

Here is additional information for you…

When to report.

Effective January 1, 2024, newly created small corporations, LLCs and similar entities, known as reporting companies, will be required to electronically report beneficial ownership information to FinCEN within 90 days of formation, subject to certain exemptions.

(See the FinCEN Beneficial Ownership Information Reporting FAQ for more detail on exemptions.)

Reporting companies existing prior to January 1, 2024, absent an exemption, must electronically report by January 1, 2025. We recommend reporting of existing beneficial owner information for existing reporting companies as soon as practicable in 2024.

Future changes to beneficial ownership information must be reported to FinCEN within 30 days of the change becoming effective. Corrections to previously filed reports must be reported within 30 days of becoming aware of or having reason to know of an inaccuracy.

(See the FinCEN Beneficial Ownership Report Filing Dates for more information.)

What and where to report.

New reporting companies are required to report detailed information about themselves, their company applicant(s), and their beneficial owners. Existing reporting companies are required to provide information about themselves and their beneficial owners.

For each of your company’s beneficial owners and each company applicant (if required to be reported), your company will need to provide: (i) the individual’s legal name, (ii) the individual’s birthdate, (iii) the individual’s address (in most cases, a home address), and (iv) an identifying number from a driver’s license, passport, or other approved document, as well as an image of the relevant document.

The reporting company is required to certify that the FinCEN report is both complete and accurate. Reporting is done online through a secure filing system known as BOSS (Beneficial Ownership Secure System) accessed via FinCEN’s website at https://www.fincen.gov/. The website will be available beginning on January 1, 2024.

Beneficial owners.

Beneficial owners are individuals who, directly or indirectly, either (i) own or control 25% or more of the ownership interests in a reporting company or (ii) exercise “substantial control” over a reporting company.

• 25% Owner. The ownership percentage is calculated at the individual level irrespective of intermediate entity or trust ownership, and the individual may own or control, directly or indirectly, ownership interests in multiple capacities. For example, if an individual owns 30% of LLC 1, and LLC 1 owns 80% of LLC 2, that individual is deemed a beneficial owner of LLC 1 but not LLC 2.
• Substantial Control. An individual exercises “substantial control” over a reporting company if the individual serves as a senior officer of the reporting company, has authority over the appointment or removal of any senior officer or a majority of the board of directors or similar body, or has substantial influence over important decisions made by the reporting company.  Control may be direct or indirect, and includes specifically, acting as a trustee of a trust or similar arrangement, through board representation, by ownership or control of a majority of voting power or rights, having rights associated with any financing arrangement or interest, through arrangements or financial business relationships with other individuals or entities acting as nominees, or via any other contract, arrangement, understanding, or relationship.

(See FinCEN Beneficial Ownership Reporting – Key Questions for more information.)

Reporting violations.

Any person who willfully provides false or fraudulent beneficial ownership information to FinCEN or willfully fails to report complete or update beneficial ownership to FinCEN is liable for a civil penalty of up to $500 per day that the violation continues and may be fined not more than $10,000, imprisoned for not more than two years, or both.

Here are some helpful documents …

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For additional assistance…

If you would like our assistance with any aspect of the Corporate Transparency Act or its reporting requirements, please contact your relationship attorney or email our CTA Compliance Desk at CTAcompliance@lplegal.com and one of our compliance specialists will get back to you.