Jason Gonzalez
United States citizens should be aware the Corporate Transparency Act (CTA) requires virtually all business entities registered in the 50 states to submit detailed written disclosure of their owners and powerholders to the US Treasury’s Financial Crimes Enforcement Network (FinCEN).
These new “Beneficial Ownership Information Reports” (BOI Reports) for entities created before 2024 need to be filed by the end of the year when the Act enforcement begins. The BOE Reports require the names, addresses, and driver’s licenses or passports of all individuals that directly or indirectly own 25% or more of the company’s ownership interests, as well as any and all individuals with “substantial control” over the company. If interests are owned by a trust, then trustees, grantors, and beneficiaries are subject to inclusion. The “substantial control” requirement includes virtually any powerholder including but not limited to directors, president/CEOs, treasurer/CFOs, general counsel, secretary officers, or any other person with power to direct or control company assets or activities.
Be advised that business entities created during 2024 have only 90 days from creation to file their initial BOI Report with FinCEN. Any business entities created after January 1, 2025 have only a 30-day filing period.
If FinCEN determines a person willfully failed to file when required, or failed to update filings upon changes in ownership or control, or otherwise provided false or fraudulent information, then FinCEN may assess civil penalties of up to $500 per day and even potential prison time.
Most state-registered business entities are required to file. There are a few narrow exemptions for larger entities that already have government disclosure filing requirements. There are roughly 23 types of businesses that may qualify for an exemption. For a detailed list of the exemptions, please see the Small Entity Compliance Guide.
While there is no annual updating filing requirement, an updated filing is required whenever there is a change in direct or indirect owners, powerholders, addresses, or other contact information. These updating reports must be filed with FINCen within 30 days of such changes. For example, filing obligations may be triggered by any changes to interest ownership that exceeds the 25% threshold, any changes to interest ownership that would lower an owner’s interest below 25%, any changes in addresses that were previously reported, or changes in the positions of senior officers within the company (i.e. CEO, CFO, COO, etc.).
We urge all registered business entity owners and managers to take immediate inventory of their entities, consult with their legal advisors as appropriate, and get those BOI Reports prepared and filed with FinCEN within their relevant filing deadlines. Do not wait until the last minute or end of the year! The review process and information and document gathering for required disclosures can be more of a burden and take more time than initially expected. Start the process now using the PDF form provided on the FinCEN website. Once complete and correct, you can use the FinCEN website to make the filings. Again, check with your legal advisors if you have any questions.
For further information, please see the FinCEN BOI website which contains FAQs, reference materials, and a helpful Small Entity Compliance Guide. If you have any questions about the Corporate Transparency Act, please contact your legal advisor, or contact us here. You can also sign-up for our newsletter here to receive more updates.
Wright Ford Young & Co. is headquartered in Irvine, CA and is the largest single office CPA firm in Orange County. WFY is a full service corporate accounting firm offering audit, tax, estate and trust, and business consulting services to closely held company and family business owners. More information about our Firm can be found at www.cpa-wfy.com.