As you may already know from our initial newsletters on this subject, we are writing to remind you that the deadline for one or more of your entities to file a Beneficial Ownership Information Report with the Financial Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Department of the Treasury, is quickly approaching. This requirement was established under the Corporate Transparency Act, which went into effect on January 1, 2024. If your entity is required to file, and was formed prior to January 1, 2024, the deadline for your initial filing is January 1, 2025.
As we previously discussed, FinCEN’s principal concern is money laundering and other criminal activities by terrorist organizations and other criminal enterprises attempting to launder money or hide illegal financial transactions. While certain entities are exempt, most small business limited liability companies, corporations and limited partnerships (each a “Reporting Company”) and certain of their individual owners, directors, senior officers and important decision makers (individuals who either (i) exercise “substantial control” over a Reporting Company or (ii) own or control 25% or more of a Reporting Company are referred to as “Beneficial Owners”) will be required to report information to FinCEN.
For those of you who are a Beneficial Owner of a limited number of entities, determining whether you are required to file and the information to file is relatively simple. Whether you have “substantial control” over an entity can be a more complex analysis that may warrant legal consultation. Substantial control analysis may take into account a number of complex control and management structures, depending on the level of sophistication of your financial affairs and estate and/or succession planning. For those of you with numerous entities that are required to report, we urge you to start now as the control analysis and document information gathering process may be time consuming.
Each individual Beneficial Owner must report, among other things, the following information:
- Their full name and date of birth.
- Their current address.
- A unique identifying number from your US passport, driver’s license number or other specified documents and an image of the corresponding document.
Further information on the requirements can be found in a recent newsletter posted on our website here.
FinCEN Identifier Registration
For those of you who are Beneficial Owners of several or more entities, we strongly encourage you to obtain a FinCEN identifier (“FinCEN ID”). We also recommend that Reporting Companies obtain a FinCEN ID to make the amendment process easier. FinCEN IDs are unique numbers that FinCEN will issue to a Beneficial Owner, control person or Reporting Company. Instead of disclosing your private information (such as your driver’s license or passport number) each time you file for, or have updates to, an entity, you will simply need to input FinCEN ID one time and use it for each initial and subsequent filing. You may register for a FinCEN ID by creating a login.gov account here. Please let us know if you would like us to assist you in the registration process.
Changes to Beneficial Ownership Information
As a reminder, any changes to a Reporting Company (such as changes to its legal name, address and status of Beneficial Owners and information relating to such beneficial owners) must be submitted in an updated BOI report within 30 days of such change.
Penalties
Please note that there are substantial penalties for not complying with the BOI requirements by (i) Reporting Companies, (ii) Beneficial Owners; and (iii) control persons, with penalties varying based on whether such noncompliance was intentional or a result of another parties’ noncompliance. While responsibility for BOI filings falls to the Reporting Company itself, liability for failing to comply with the requirements by Beneficial Owners and control persons runs to “any person” involved in the filing or omission.” This means that senior officers, directors and any Beneficial Owners may be liable for such penalties, whether directly or indirectly involved in such failure. Notably, those individuals can be held liable if they either cause the failure or are a senior officer at the company at the time of the failure.
Vcorp Services
In order to expedite the compliance process KTAP has partnered with Vcorp Services, a trusted partner, who will work with you and facilitate BOI filings for you. VCorp Services is a division of Wolters Kluwer, an internationally recognized corporate services and information technology company. Vcorp offers a suite of services such as entity formations, state filings, document retrieval, tax-exempt filings, UCC filings and BOI reports. We recommend using VCorp, or another similar corporate service company, for your BOI filings via t its secure online portal at Vcorp entitycompli.com. As our partner, if you use the code “KudmanLaw”, you will receive a 10% discount in addition to the rates that we have negotiated as a courtesy to our clients. As with all disbursements, KTAP does not mark up these disbursements or receive any commission or other compensation from VCorp. Alternatively, you may email our representative, Sarah Rayburn, at srayburn@vcorpservices.com. Please let us know at your earliest convenience if you are electing to use their services by responding to this Notice.
If you prefer to file independently, please be advised that the BOI reports must be filed through FinCEN’s e-filing portal here. Please understand that doing it without the assistance of such a company can be a time-consuming process. Regardless of whether you use an outside service or “go it alone” we ask that you provide us with copies of your filing for our corporate records.
As questions inevitably arise as you determine whether your entity is a Reporting Company and who its Beneficial Owners are, we at KTAP are here to provide you with support and legal advice on issues such as:
- Whether the inactive entity, large operating company or subsidiary exemptions apply to your situation.
- How to determine beneficial ownership percentages in complex organizational structures.
- Who the Beneficial Owners are when a trust owns 25% or more of a Reporting Company or exercises substantial control.
- When changes to previously reported information (such as amendments to ownership structures following, for example, board amendments, sales or other types of transactions) require filings to be amended.
- What to do if a Beneficial Owner refuses comply with reporting requirements.
Given that the CTA penalties can be significant and for more complicated ownership structures the time involved is likely to be more than one expects, we advise you to take care of your CTA filings sooner rather than later.
Of course, if you have any questions on the process or requirements, please do not hesitate to contact us.
About Kudman Trachten Aloe Posner LLP
Kudman Trachten Aloe Posner LLP is a full-service commercial firm that focuses on commercial transactions, buy-and sell-side mergers and acquisitions, complex commercial litigation, including bankruptcy and creditors’ rights, healthcare and reimbursement, corporate finance and day to day corporate work, including tax, intellectual property and real estate, white collar criminal and civil fraud defense and internal investigations, and employment law. See https://www.kudmanlaw.com for more information.
