New Reporting Requirements – Corporate Transparency Act & Beneficial Ownership Information

The Reporting Requirements:

Beginning on January 1, 2024, many companies in the United States will have to report information about their beneficial owners, i.e., the individuals who ultimately own or control the company. They will have to report the information to FinCEN, a bureau of the U.S. Department of the Treasury.

Who Has to Report?

 Companies required to report are called reporting companies. Your company may be a reporting company and will need to report information about its beneficial owners if your company is:

• A corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe; or
• A foreign company and was registered to do business in any S. state or Indian tribe by such a filing.

Who Does Not Have to Report?

 Twenty-three types of entities are exempt from the beneficial ownership information reporting requirements. These entities include publicly traded companies, nonprofits, inactive companies, and certain  large  operating  companies.  See  the  Frequently  Asked  Questions  (or visit  www.fincen.gov/boi-faqs) page for more information.

• To be considered a large company, you must have 20+ employees and over $5 million in revenue on your most recent tax return.
• To be considered an inactive company, it cannot be engaged in active business, with no change in ownership or any transactions greater than $1,000 total in the past year. It also must’ve been formed prior to January 1, 2020.

Why Do I have to Report?

In 2021, Congress enacted the Corporate Transparency Act (“CTA”) as a part of the National Defense Act of 2021. The CTA’s goal is to create a comprehensive, searchable, national database of entities. The objective is to pierce through the entity and identify who is behind it. This is part of a worldwide effort to combat criminal activities including tax evasion, money laundering, and other financial crimes.

What Do I Have to Report?

Each company must report the following information:

• The full legal name of the reporting company and any trade name or DBA name;
• US Business address from the reporting company’s principal place of business;
• State or jurisdiction of formation or registration;
• IRS taxpayer identification number or social security number (for disregarded single member LLC); and
• An identifying document from an issuing jurisdiction (i.e., certificate of incorporation, certificate of organization) and a copy of that document.

In addition, each company must report the following details on its beneficial owners, and for newly created entities, on its company applicant(s):

• Each person’s name;
• Date of Birth;
• Home address; and
• Unique identifying document that includes a photograph of the individual (i.e., driver’s license, passport) and a copy of that document.

When Do I Report?

Reporting began on January 1, 2024. The dates below indicate relevant timelines for you to be aware of:

• If your company was created or registered prior to January 1, 2024, you will have until January 1, 2025, to report BOI.
• If your company was created or registered on or after January 1, 2024, and before January 1, 2025, you must report BOI within 90 calendar days after receiving actual or public notice that your company’s creation or registration is effective, whichever is earlier.
• If your company is created or registered on or after January 1, 2025, you must file BOI within 30 calendar days after receiving actual or public notice that its creation or registration is
• Any updates or corrections to beneficial ownership information that you previously filed with FinCEN must be submitted within 30 days.

What Happens if I Don’t Report?

In furtherance of its goal to deter criminal activity, Congress has introduced stringent penalties for non- compliance. In fact, failure to complete an initial report or update information with FinCEN, or intentionally providing false or fraudulent information can result in the following penalties for individuals, companies, or both:

• Civil penalties up to $500 per day that a violation continues, with a maximum of a $10,000 fine; and/or
• Criminal penalties, including a $10,000 fine and/or up to two years

How Do I Become Compliant?

For a reporting company to become compliant, you must report a Beneficial Ownership Information Report (“BOIR”) by the relevant deadline (above) to FinCEN. The application to report your BOIR is self- explanatory and easy to navigate. In addition to submitting the initial BOIR to FinCEN, reporting companies must continue to file reports upon the happening of certain changes to your entity, including:

• Any changes to the Beneficial Owners, including transfers of ownership interest (i.e., stock transfer, membership interest transfer, interest transfers upon death, etc.);
• Any changes to Beneficial Owners information (i.e., moving to a different state, deaths, name changes, etc.)

Identifying Beneficial Owners 

Beneficial Owners, Generally. Once major component of the BOIR requirement is the reporting on any and all Beneficial Owners of the company A Beneficial Owner means any individual who, directly or indirectly, either exercises substantial control over such reporting company or owns or controls at least 25 percent of the ownership interests of such reporting company.

• 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);
  • Directs, determines, or has substantial influence over important decisions made by the reporting company.

• An individual may directly or indirectly, including as a trustee of a trust or similar arrangement, exercise substantial control over a reporting company through:
  • Board representation;
  • Ownership or control of a majority of the voting rights of the reporting company;
  • Rights associated with any financing arrangement in a company;
  • Control over intermediary entities that separately or collectively exercise substantial control over a reporting company;
  • Financial or business relationships with other individuals or entities acting as nominees; or
  • any other contract, arrangement, understanding, relationship, or

Visit FinCEN’s Small Entity Compliance Guide for further information on Beneficial Owners.

Examples.

• Suppose that George and Winona, husband and wife, and their son Sam each directly own one-third of Farragut Co., a corporation through which they run their small family farm. Sam serves as the president, Winona is the chief operating officer, and George is the general counsel. There are no other individuals who serve as senior officers or exercise substantial control through any other arrangement. Here, George, Winona, and Sam would be the only beneficial owners of the reporting company. If Sam steps down from his role as president but maintains his ownership interest, and his brother James is named president of Farragut Co., then James would also be a beneficial owner.
• Suppose Sarah and Skyler each directly own fifty percent of Adelaide’s Cement, , a small, closely held construction supply company. Sarah is the president, Skyler is chief executive officer, and Adelaide’s Cement has no other officers. Nathan has been manager and chief clerk for forty years, responsible for the day-to-day operations and staffing of the company. Nathan has the authority to hire floor staff, but not senior officers. He controls the petty cash and payroll disbursements and is authorized to be the sole signatory for checks under the amount of $5,000. He does not have authority to make major expenditures or substantially influence the overall direction of the company. In this scenario, Sarah and Skyler are beneficial owners, and Nathan is not a beneficial owner.

How Perkinson Legal Can Help:

As industry trusted advisors, we want to emphasize the importance of the new reporting requirement. It is imperative that individuals begin thinking about what they need to do to comply and connect with their attorneys to assist in the process. Perkinson Legal is committed to serving clients in every capacity, including BOIR compliance.

Though most clients will be able to complete the BOIR application themselves, certain companies with multiple legal entities or complex ownership structures may face challenges working through the requirements. In all cases, Perkinson Legal can assist you in the following ways:

• Determining whether you are a reporting company within the confines of the CTA, and thus required to report on your company, Beneficial Owners, and Company Applicants;
• Assisting in the navigation of the exemptions of the CTA;
• Identifying the Beneficial Owners of your company;
• Identifying changes that may trigger the requirement to file a new or corrected report; and
• Other questions during the filing process

If you have any questions, or would like any additional information, please contact our office at (513) 653-3600

Michael J. Perkinson | Attorney 201 E. 8th Street
Cincinnati, OH 45202
Office: (513) 653-3600
mjp@perkinsonlegal.com