Beneficial Ownership Information and Reporting Requirements
November 27, 2024 | Collins Consulting
Collins Consulting wants to let you know about significant changes in federal law that affect those who operate or are members of, a Corporation, LLC, Co-Op, Limited partnership registered in the United States.
Starting January 1st, 2024, the Corporate Transparency Act ("CTA'') applies to all domestic entities (including corporations, limited liability companies and limited partnerships) and foreign entities doing business in the United States, unless an exemption applies (exemptions discussed below). You may be subject to new reporting requirements if you own or are responsible for any of these types of entities.1
Please Note: This required reporting has no connection to income tax filings.
Financial Crimes Enforcement Network ("FinCEN"), which is a bureau of the United Stated Treasury Department, has been tasked with and will oversee creating and maintaining the database and administering the CTA.
The new reporting requirements require entities to file Beneficial Ownership Information ("BOI Report") with the FinCEN. All companies subject to the CTA must include the following information in their BOI Report relating to the company itself:
- Legal name of the entity, including any trade names or DBAs
- State of Formation
- Date of Formation
- Tax Identification Number for the entity
The reports also include information on certain individuals, including (i) individuals exerting substantial control over the entity or (ii) individuals who own, directly or indirectly, 25% or more of ownership interest in the entity. The BOI Report must include the following information relating to its Beneficial Owners:
- Full Legal Name
- Date of Birth
- Personal Residence
- Identification Number and scan of Identification Document - for instance, a state issued identification card, driver's license, or U.S. Passport.
Compliance is important as the CTA imposes severe civil and criminal penalties for willful violations of its reporting requirements upon entities that do not file the BOI reports accurately and timely. Those penalties also apply to any beneficial owner that fails to provide accurate and complete personal information for the BOI reports. Penalties start at $500.00 per day with a total penalty allowable of $10,000.00 per occurrence and 2 years incarceration.
Additionally, if any information previously included in a BOI Report changes after the initial filing, an amended BOI Report must be filed within thirty (30) days of the change. This would include, but is not limited to, changes to a beneficial owner’s name due to marriage or divorce, moving to a new residence, or if the identification originally provided expires or is renewed.
There are 23 types of entities that are exempt from the CTA reporting obligation. Under certain circumstances, those entities that are already subject to other substantial federal reporting requirements (such as public companies, banks, securities brokers and dealers, insurance companies, and registered investment companies and advisors) may be exempt.
Another significant exemption is for certain large operating companies (which generally involves entities with more than 20 full-time U.S. employees, an operating location in the U.S., and more than $5.0 million in gross receipts or sales from U.S. sources, as reported on the prior fiscal year tax return). Certain tax-exempt entities (non-profits), trusts, wholly owned subsidiaries, and inactive entities may also be exempt. However, additional considerations may apply to the foregoing exemption determinations.
For those companies that do not fall under an exemption, the CTA reporting requirements must be followed. If your entity started after January 1, 2024, you have 90 days to complete after the entity is set up. For any entity already in existence on December 31, 2023, you must file by December 31, 2024. Regardless of the status of the entity at the end of 2024, if your entity was active on December 31, 2023, you must file.
This is not legal advice and should not be a substitute for legal advice that reviews your specific circumstances related to your CTA reporting requirements. Collins Consulting would encourage you to review your particular situation with someone who has knowledge with these new requirements and how they may impact your specific entity and the implications of them. Moreover, rules governing the CTA are being finalized by FinCEN and may continue to change moving forward. Please note that this letter may not address all of the requirements to comply with the CTA.1
Collins Consulting will not be providing this service for CTA Reporting with FinCEN, as some states may not allow accountants to handle. It would be best to contact an attorney and/or do this BOI reporting on your own. FinCEN expects that most reporting companies will be able to submit their BOI to FinCEN on their own.
We are looking forward to another busy tax season. If you have any questions, contact us online or give us a call at (712) 487-3853.
1 United States Department of the Treasury Financial Crimes Enforcement Network | FinCEN.gov
2 Beneficial Ownership Information Reporting | FinCEN.gov
About Collins Consulting: Collins Consulting is a full-service tax and accounting firm, started in 1970 by Norm Collins in Treynor, Iowa. In August of 2018, TS Banking Group acquired Collins Consulting as a wholly-owned subsidiary.