Important New Federal Reporting Requirements of Entity Ownership

Corporate Transparency Act – Beneficial Ownership Information ReportEffective January 1, 2024, new federal regulations under the Corporate Transparency Act (CTA) now require certain entities/companies (described further below) to report certain “beneficial owner information” (BOI) to the Financial Crimes Enforcement Network (FinCEN).

In other words, certain personally identifiable information (i.e., name, address, date of birth, etc.) is required to be reported to the federal government for the beneficial owners (described further below) of any such entity/company.

The CTA was enacted by Congress as part of the National Defense Authorization Act.  The intent is to prevent and identify money laundering, terrorism financing, and other forms of illegal financing by mandating such entities to report this beneficial owner information.

How do I file a BOI report?

Directly online!

You can file each BOI online through the FinCEN website – https://www.fincen.gov/boi.  This is the only method of filing currently permitted.

Who must file a BOI report?

Most domestic U.S. entities.

With the CTA, those entities that are required to file a BOI are called reporting companies. There are two types of reporting companies:

• Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
• Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.

There are 23 types of entities that are exempt from the reporting requirements, including tax-exempt entities, inactive entities, investment advisors, and large operating companies.  Within the list of exemptions, most relevant to our clients is the definition of “large operating companies”.  A company must meet all 3 of the following criteria in order to be a “large operating company” (and thus be exempt from the requirement of filing the BOI report):  (1) must employ more than 20 full time employees in the United States; (2) must have a physical office within the United States; and (3) must have filed a Federal income tax or information return in the United States for the previous year demonstrating more than $5 million in gross receipts or sales.  If your company meets all of these requirements, then you are exempt from the BOI reporting requirements.

When Must I File a BOI Report?

It depends!

• Reporting companies that existed prior to January 1, 2024, must file their initial BOI report prior to January 1, 2025
• Reporting companies that were created on or after January 1, 2024, must file their initial BOI report within 90 calendar days after registering the business.
• Reporting companies that were created on or after January 1, 2025, must file their initial BOI report within 30 calendar days after registering the business
• After the initial BOI report is filed, changes to information relating to the reporting company or a beneficial owner must be filed within 30 calendar days after the change. Any corrections or changes must be filed within 30 days after the reporting company is made aware of the correction or change.

Who is a Beneficial Owner?

The CTA defines a beneficial owner as any individual who either directly or indirectly:

• exercises substantial control over the reporting company; or
• owns or controls at least 25% of the ownership interest in the reporting company.

A copy of a passport and/or a driver’s license will be needed for each beneficial owner to accompany the BOI report.

For More Information, Please Visit the Following

FinCEN: https://www.fincen.gov/boi

Virginia’s State Corporation Commission: https://www.scc.virginia.gov/pages/CTA-FAQs-(1)