By Emily M. Frohman, Esq. and Brandon J. Leal, Esq.
The Corporate Transparency Act (the "CTA"), the federal law requiring most small businesses to file a beneficial ownership information report ("BOI Report") with the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN), has now gone into effect, and FinCEN has launched the system for filing the BOI Report.
As of January 1, 2024, the CTA requires most existing and new domestic and foreign business entities in the United States to file BOI Reports with FinCEN disclosing certain information regarding their beneficial owners and, for companies formed on or after January 1, 2024, the company applicant(s) who directed the formation of the company. For a more detailed overview of the requirements for reporting companies under the CTA, check out our first article on this topic released June 23, 2023 and our second article released November 16, 2023.
Depending on when the company was formed, reporting companies have the following deadlines for submitting their initial BOI Report: (a) January 1, 2025 (for companies already in existence prior to January 1, 2024), (b) ninety (90) days from the date of formation of the company (for companies formed between January 1, 2024 and December 31, 2024), or (c) thirty (30) days from the date of formation of the company (for companies formed on or after January 1, 2025).
All persons forming a new business entity on or after January 1, 2024 should be prepared to file the new entity's initial BOI Report at the time the articles of incorporation/organization are filed with the applicable Secretary of State. For all entities existing prior to January 1, 2024, WHP is currently advising our clients to wait until the third quarter of this year to file their initial BOI Reports. As with any new and novel law, small business owners should be proactive and begin preparing for compliance with the CTA NOW, even though many may have until January 1, 2025 to file.
FinCEN has now launched its U.S. Beneficial Ownership Information Filing System (the "Filing System") and is accepting BOI Reports. The positive news is that the Filing System appears to be very user friendly.
There are five parts to the online BOI Report Filing System:
Below is a brief description of each part, and the information that is required for submission.
Filing Information:
The first step in preparing the BOI Report is identifying the type of report the reporting company is filing. For all first time filers, the reporting company will select "Initial Report." Remember, reporting companies are required to update or correct their initial reports if any of the reported information changes or is discovered to be inaccurate. In the event that you need to file an updated or corrected report, you will use this same filing system, and will choose "Update prior report" or "Correct prior report", as applicable.
Reporting Company Information:
The next step is for the reporting company to identify itself. The reporting company will insert its complete legal name (the name as it appears on the entity's Articles of Incorporation or Articles of Organization), as well as any trade names or "doing business as" names that the reporting company uses. Further, the reporting company will identify the type of Tax ID number the reporting company uses (SSN, ITIN, EIN or Foreign equivalent). Only disregarded entities will use the owner's SSN or ITIN, most other entities will have an EIN. Finally, the reporting company will provide its U.S. address (companies that operate at more than one address should use the address of their principal place of business).
This section also gives the reporting company the option to request a FinCEN ID.
Company Applicant Information:
Only reporting companies formed on or after January 1, 2024 are required to complete this Section. There is a box (labeled Item 16) in the top left corner of the online form to check if the reporting company was in existence prior to January 1, 2024. If the reporting company is required to complete this information, it will provide the required information for up to two company applicants, that is, the person or persons who directed the filing of the document that formed the reporting company, and the person who actually submitted the filing with the applicable Secretary of State's office. Company applicants can only be individual persons, not legal entities.
Beneficial Owner Information:
In this Section the reporting company will provide the required information for each of its beneficial owners, and there is no limit to the number of beneficial owners a reporting company may have. Prior to completing this Section, the person(s) responsible for completing the report should have already worked with the reporting company's decision makers and advisors to (a) identify the reporting company's beneficial owners, and (b) collect the required information and documentation from each identified beneficial owner.
If the reporting company has more than one beneficial owner, once it has completed inserting information for the first beneficial owner, it will need to click the option to "Add Beneficial Owner" located in the top right corner of this page of the online form.
For more information on correctly identifying a company's beneficial owners, we recommend reviewing our previous articles, linked below, as well as FinCEN's small business resources.
As a note, if a beneficial owner is a minor, the reporting company will need to check the box (labeled Item 35) indicating that the reporting company is providing information regarding the minor's parent or guardian.
Submission:
Once a reporting company finishes providing information for ALL of its identified beneficial owners, the individual filing the BOI Report will complete the report by inserting his or her email address, first name and last name and certifying that this individual is authorized to submit the BOI Report and that the information provided is true, complete and correct.
Reporting companies should not rely on or expect their counsel or other trusted advisors to complete and submit the form on their behalf. However, your WHP counsel is available to assist by providing guidance on how to accurately complete your BOI Report.
As always, do not hesitate to contact your WHP counsel with any questions or concerns you may have.
For more information about the CTA, see our article from June 23, 2023, "The Corporate Transparency Act: BIG News for Business Owners!", and our article from November 16, 2023, "The Corporate Transparency Act: Next Steps for Business Owners".
This article provides an overview and summary of the matters described therein. It is not intended to be and should not be construed as legal advice on the particular subject.