The Corporate Transparency Act

There has been a significant change for some entities that do business within the United States which began on January 1, 2024. The Corporate Transparency Act (CTA) imposes new beneficial ownership reporting requirements. This new act was created to combat money-laundering, tax fraud, and other illicit activities. While some of the guidance appears to still be developing, up-to-date information is below.

Reporting companies will be defined as domestic or foreign. 

·         “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.”1

While there are exemptions, many do not apply to our clients.  Registered charitable organizations is one exemption.  Another notable exemption are “large operating companies”: defined as having more than 20 full-time employees in the US, an office in the US, and demonstrates more than $5 million in gross receipts or sales on their tax return. A full list of the exempted entities can be found on FinCEN’s Frequently Asked Questions page. Beyond this, entities will need to submit a report stating beneficial ownership information (BOI). A beneficial owner is an individual who, directly or indirectly, either exercises substantial control over the reporting company or owns or controls at least 25 percent of its ownership interests. 

Reported information will also contain any individuals serving as officers or directors. Beyond the individuals listed above, entities will also need to disclose information regarding the business such as the legal name, EIN and similar information for any reported individuals.

Companies will submit the report through the BOI e-filing System. It is important to note that companies created or registered on or after January 1, 2024 and before January 1, 2025 have 90 calendar days (from receipt of creation notice or public notice) to submit this report. Entities created or registered after January 1, 2025 will have 30 calendar days to file their initial BOI report. Existing entities organized or registered before January 1, 2024 must file their initial report by January 1, 2025.  Penalties will be imposed for non-compliance. After filing the initial report, entities must file additional reports if any changes are made within the company regarding beneficial ownership (i.e., mergers or death).  Given that this is new legislation, it is prudent to remain aware of any changes that are made to this act as it is implemented.

While we can answer questions and provide assistance with this filing requirement, Hark and Associates, PC will not be responsible for initial and ongoing CTA / BOI reporting. If a reporting company has been created or established prior to January 1, 2024 and you would like us to complete these filings on your behalf, a separate engagement would cover these services. It’s important to remember that these companies have all of 2024 to report and file the information so we would appreciate handling this after the tax filing deadline. If you have a reporting company that is established on or after January 1, 2024 and before January 1, 2025, understand that this information is due within 90 days of establishing the entity.

If you need our assistance with the initial reporting for new entities, you can call or email the office to request this. Given that this will be covered by a separate engagement letter and it is recommended that you reach out to our office & discuss this prior to establishing the entity as our firm will also need 90 days’ notice to meet the initial filing. Please note that none of the engagements we offer for BOI / CTA purposes covers any reporting requirements beyond the initial report. It is the sole responsibility of the client or managing member of the entity to file any and all amendments with FinCEN if there are subsequent changes that need to be reported. Please note that the FinCEN frequently asked questions page specifically states that FinCEN charges no fees for submitting the beneficial ownership information report to FinCEN.  While we are happy to answer questions, clients are encouraged to do their own research before engaging our firm to assist with these filings. Reporting entities that have simplified ownership structures and operations may be able to provide the information and file this report without any assistance.