09/24/2024
ANNOUNCEMENT! The Corporate Transparency Act (or “CTA”) is a relatively new federal law. Under the CTA, effective as of January 1, 2024, most entities (primarily corporations and LLCs) are required to submit an electronic Beneficial Ownership Information Report (or “BIOR”) with the U.S. Treasury Department’s Financial Crimes Enforcement Network (or “FinCEN”).
This new requirement is intended to better align U.S. disclosures with international standards and assist law enforcement with investigations of money laundering and similar criminal activity.
Who must file a BIOR?
The general rule is all U.S. entities and foreign entities registered to conduct business in the U.S. are required to file a BIOR. Entities tend to be exempt from this requirement if they are subject to other regulatory requirements that require ownership disclosures (for example, publicly-traded corporations, banks, tax-exempt entities, etc.) or if they’re a “large operating company.” An entity qualifies as an exempt “large operating company” if (i) it has more than 20 full time U.S.-based employees, (ii) maintains a U.S. physical office, and (iii) receives more than $5 million in U.S.-based revenue.
When must the BIOR be filed?
For all entities required to submit a BIOR that were in existence as of January 1, 2024, its BIOR must be filed by January 1, 2025. For all new entities, i.e., formed on or after January 1, 2024, its BIOR must be filed within 90 days from the date of its official formation.
What is required to be disclosed?
The BIOR is a relatively straight-forward form which requires disclosure of basic information as to ownership and executive control of the reporting company. Required disclosures includes the entity name, tax ID #, entity address, and the name, address, birthdate and a picture of an official ID (e.g., unexpired passport or driver's license) of each “beneficial owner”. An individual is a “beneficial owner” if they own or control at least 25% of the ownership interests of the reporting company, or if they exercise substantial control over the reporting company, which largely equates to the entity’s executive management. Note that an individual must be disclosed as a “beneficial owner” if they are an executive (such as a corporate president, CFO, COO or the manager of an LLC), even if they have no ownership interest in the entity.
Additionally, for entities formed after January 1, 2024, details on its “Applicant” or organizer, must also be disclosed. This is the person responsible for submitting the formation documents to the Secretary of State, a role I commonly perform for clients. For existing reporting companies (i.e., those formed prior to 2024), when you check the box for item #16 on the BIOR indicating that it’s an existing reporting company, Part II. Company Applicant Information below item $16 will grey-out and will be skipped.
Information disclosed pursuant to a BIOR is to be maintained as confidential by FinCEN except for disclosures pursuant to warrants and other official law enforcement investigations.
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The FinCEN homepage website for BIOR filings is https://www.fincen.gov/boi, with the actual form at https://boiefiling.fincen.gov/fileboir. It’s on this second page that you may elect to “File PDF BIOR” using the separate pdf which you can download at that page, or complete the BIOR directly via the site by selecting “File Online BOIR”. We believe it is best and easiest to file directly online if you are able to.
If your reporting company has more than one “beneficial owner” that needs to be included, you’ll need to have additional fields added. This is easily done at the heading for Part III. Beneficial Owner Information, you click on the “+” to the right of the heading on the pdf, or if submitting online directly, click on “Add Beneficial Owner” to the right of the heading.
If you are our client and need help with this, please let us know by giving us a call at: 815-633-0660
