| In 2021, Congress passed the Corporate Transparency Act (CTA). The law is designed to capture more information about the ownership of specific entities conducting business in, or accessing, the U.S. market. The CTA was developed in response to the use of shell companies and front companies to conceal from the U.S. Government the identities of “illicit actors” who are using these companies to conceal illegal activity and shelter money and assets obtained through illegal means. WHO IS AFFECTED: The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued the first rule, effective January 1, 2024, which requires certain businesses to report beneficial ownership information (the BOI Reporting Rule) to FinCEN. Reporting companies are corporations, LLCs or any other entity created by the filing of a document with the secretary of state or similar office. There are several entities exempt from the requirement, some of which are brokers in securities, insurance companies, and tax exempt entities. Also exempt are large operating companies, which are those employing 20 or more full-time employees in the US, have more than $5 million in gross receipts and have an operating presence at a physical office in the US. INFORMATION REQUIRED: Reporting companies are required to report all beneficial owners. There are two categories of beneficial owners: 1) those that exercise substantial control over a reporting company and 2) individuals that own or control at least 25% of the ownership interests of the company. Information that is required to be reported for each beneficial owner includes name, date of birth, address and photo of valid passport or driver’s license. DUE DATE: Companies in existence on the January 1, 2024 effective date have one year to file the initial report (on or before January 1, 2025). New companies that were not in existence on January 1, 2024, will have 30 days to file the initial report after a notice that its creation or registration is effective. Changes (including change in ownership) or inaccuracies are also required to be reported within 30 days. FEE: There is no fee for BOI reporting; however penalties can be significant. A person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. That person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information. Please reach out to your contact at Westbrook & Company if you would like more information on this new requirement or if you would like us to handle the reporting for you. |
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