Understanding the Corporate Transparency Act Registration Requirements
Have you heard about the new federal regulations requiring you to register your business and beneficial owners with the Financial Crimes Enforcement Network (FinCEN)? Registration is open as of January 1, 2024.
Why the Spotlight?
The Corporate Transparency Act (CTA) shines a light on who truly owns and controls business entities in the US. This bipartisan effort aims to fight financial crime and terrorism by cracking down on the use of anonymous shell companies, often employed for money laundering and illegal activities.
Who’s Under the Spotlight?
Most small business entities formed or registered to do business in the US and their beneficial owners must register with the FinCEN's Beneficial Ownership Information (BOI) Registry. This includes corporations, LLCs, limited partnerships, and certain trusts. Exemptions exist for financial institutions, publicly traded companies, and nonprofits. There are some 23 exceptions, but they don’t apply to most. Review on the FinCEN website to be sure.
Who Qualifies?
Remember, the CTA focuses on "beneficial owners," not just anyone listed on corporate documents. So, who exactly falls under this category?
An individual qualifies as a beneficial owner if they directly or indirectly:
Own or control at least 25% of the ownership interests in the business entity. This includes voting shares, equity interests, or any other form of ownership stake.
or
Exercise "substantial control" over the entity. This can be through various means, including:
Holding key decision-making positions like CEO, president, or managing member.
Having significant voting power or control over board appointments.
Exercising control through contracts, agreements, or relationships with the entity.
Holding power of attorney or acting as a nominee or intermediary for another beneficial owner.
Remember, control can be both direct and indirect.
What's in the Spotlight?
For each “reporting” company, you’ll need to report:
Its legal name
Any trade names, “doing business as” (d/b/a)
The current street address of its principal place of business
Its jurisdiction of formation or registration
Its Taxpayer Identification Number
For each "beneficial owner," you'll need to report:
Full legal name
Date of birth
Residential street address (business address for certain company applicants)
Unique identifying number from specific government IDs (e.g., passport, driver's license)
Image of the ID document
Where to Register:
Head over to the FinCEN BOI website (https://www.fincen.gov/boi) for all the registration details, step-by-step guides, and helpful FAQs.
Entities formed prior to January 1, 2024 have one year to register. Entities formed January 1, 2024 or later have 90 days to register. Entities formed January 1, 2025 or later have 30 days to register. Updates or changes to a registration must be done within 30 days of the changed information.
Consequences of Staying in the Shadows:
Failure to register timely can mean:
Civil penalties of up to $500 per day for willful failure to comply (for each day the violation continues). Up to $10,000 and two years in prison for willfully providing false or fraudulent BOI
Potential criminal charges
Remember, knowledge is power – inform yourself and stay compliant!
****This summary provides a concise overview of the CTA registration requirements for business entities and owners, and is not to be construed as legal advice for your specific situation. Please contact us if you have questions or need assistance with registration.
