Background:
In today’s global economy, business entities often operate across international borders, making it increasingly difficult to trace individual ownership of corporate entities. This lack of transparency has allowed for the abuse of corporate structures for illicit activities such as money laundering, tax evasion, and terrorism financing. To address these concerns, the United States Congress passed the Corporate Transparency Act (CTA) to better track the beneficial ownership of corporate entities.
Reporting Companies:
For the purposes of the CTA, a ‘Reporting Company’ is any domestic or foreign corporation, LLC, LLP, or similar fiduciary entities created or formed by filing a document with an applicable secretary of state or state office. The CTA excludes a handful of entities from BOI reporting, the most common exemptions include general partnerships, sole proprietorships, nonprofit organizations, and publicly traded companies. The full list of exemptions can be found in 31 C.F.R. § 1010.380(c)(2).
Beneficial Ownership Reporting (BOI):
Beginning January 1st, 2024, entities including Corporations, LLCs, Partnerships, and similar fiduciary structures will be required to disclose Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN). Beneficial owners are individuals who directly or indirectly own or control 25% or more of the entity’s ownership interest. Unless an exemption is available, each Reporting Company must file an initial report with FinCEN detailing the following information:
Reporting Company Information:
- Business name
- Any trade or ‘doing business as’ (dba) names.
- U.S. business address or principal place of business
- IRS taxpayer identification number (TIN)
Beneficial Owner Information:
- Full Legal Name
- Date of Birth
- Current Residential or Business Address
- Government issued identification number such as a Social Security Number or Passport ID
Timeline to file:
Non-exempt entities in existence prior to January 1st, 2024, will have until January 1st, 2025, to file the initial report. Newly formed entities in 2024 will have 90 days to file after the effective date of receiving a notice of formation or registration.
Penalties for Non-Compliance:
The CTA imposes civil and criminal penalties for non-compliance. Failure to report beneficial ownership information can result in fines of up to $500 per day. Willful violations may lead to fines of up to $10,000 and imprisonment for up to two years.
About Us:
Newman & Lickstein, LLP has served as trusted legal advisors in the Central New York Community for over fifty years. The firm solves complex business and corporate transactions, real estate matters, and litigation disputes. The firm partners with its clients to innovate, grow, and protect what matters most for their businesses, families, and communities. Our team draws upon their expertise in business, technology, and intellectual property law to advise early and growth stage technology businesses, many of the world’s most popular streaming talent and content creators, management firms, gaming brands, and a range of other technology-focused industries through all phases of their business’ lifecycle, including venture capital transactions and mergers and acquisitions.
