Dear Clients and Colleagues,
The Corporate Transparency Act was enacted by Congress in 2021 and became effective January 1, 2024 for corporations and limited liability companies with some limited exceptions. We refer you to your business attorney and www.fincen.gov/boi for details, but here are the highlights as we understand them.
First, the following warning excerpted from the FinCEN website:
Alert: FinCEN has been notified of recent fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act. The fraudulent correspondence may be titled “Important Compliance Notice” and asks the recipient to click on a URL or to scan a QR code. Those e-mails or letters are fraudulent. FinCEN does not send unsolicited requests. Please do not respond to these fraudulent messages, or click on any links or scan any QR codes within them.
What is the purpose of this reporting requirement?
This report is the US government’s effort to make it harder for bad actors to hide or benefit through shell companies or other opaque ownership structures.
Who must report?
1. Corporations and limited liability companies created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe, or
2. Foreign companies registered to do business in any US state or Indian tribe by such a filing.
Who does not have to report?
Twenty-three types of entities are exempt including publicly traded companies, nonprofits, and certain large operating companies. See FinCEN’s Small Entity Compliance Guide for a complete list of exemptions with more detail.
How do you report?
Report electronically through FinCEN’s website www.fincen.gov/boi. The system will provide the filer with a confirmation of receipt once a completed report is filed.
When do you report?
Reports will be accepted starting January 1, 2024.
- If your company was created or registered prior to January 1, 2024, you will have until January 1, 2025 to report BOI.
- If your company was created or registered on or after January 1, 2024, and before January 1, 2025, you must report BOI within 90 calendar days after receiving actual or public notice that your company’s creation or registration is effective, whichever is earlier.
- If your company was created or registered on or after January 1, 2025, you must file BOI within 30 calendar days after receiving actual or public notice that its creation or registration is effective.
- Any updates or corrections to beneficial ownership information that you previously filed with FinCEN must be submitted within 30 days.
What is a beneficial owner?
Beneficial ownership refers to individuals who directly or indirectly own or control a company.
- Exercises substantial control over the company, or
- Owns or controls at least 25% of the company’s ownership interests.
An individual can exercise substantial control over the reporting company if:
- The individual is a senior officer (the company’s president, CFO, general counsel, CEO, or any other officer who performs a similar function).
- The individual has authority to appoint or remove certain officers or a majority of directors (or similar body).
- The individual is an important decision-maker.
- The individual has any other form of substantial control.
See FinCEN’s Small Entity Compliance Guide for more detail. These four bullet points perhaps create more questions than they answer, so please read the guide – there are very good explanations and expanded detail to help you.
To be very clear, Vanderbilt CPAs is not able to file these reports for you. This message is our opportunity to advise you of your responsibility, and the timeline for filing.
Welcome to 2024, everyone!
The Vanderbilt Team