In 2021, Congress enacted the Corporate Transparency Act (CTA) that imposes reporting requirements on certain companies and requires such reports be compiled into a national database. The stated purpose of the CTA is to help law enforcement prevent the use of U.S. companies to hide identities and launder illicit funds. Consequently, certain “reporting companies,” which include limited liability companies (LLCs), limited partnerships (LPs) and corporations, will be required to submit a report (known as the “Beneficial Ownership Information” (BOI report)) to the Financial Crimes Enforcement Network (FinCEN) starting in 2024 disclosing certain information about the company and its owners.   

If you own an LLC, corporation, or other entity created by filing papers with a state’s secretary of state (or similar office) — whether for estate planning purposes or as an active business — here is important information to be aware of:

1. Entities required to file a report with FinCEN include:

• LLCs, LPs, S or C corporations, and other entities created by filing with the secretary of state or other similar office. This includes non-active businesses, such as an LLC formed for estate planning or asset protection purposes.
• Foreign entities that are registered to do business in the U.S.

2. Information required to be reported for entities created or registered to do business in the U.S. before January 1, 2024:

• Company information, including:
  • Legal name of the entity and any trade names
  • Street address for principal place of business in the U.S.
  • State or jurisdiction of formation
  • Tax identification number
• Information for each “beneficial owner” including:
  • Full legal name
  • Date of birth
  • Home address
  • Identifying number from an identification document (e.g. non-expired U.S. driver’s license, U.S. identification document, U.S. passport, or non-U.S. passport)
  • Name of state or jurisdiction that issued the identification document
  • PDF of identification document

3. Information required to be reported for entities created or registered to do business in the U.S. on or after January 1, 2024:

• Company information (same as above)
• Information for each beneficial owner (same as above)
• Information for “company applicants”, including:
  • Legal name of company applicant
  • Date of birth
  • Applicant’s address
  • Identifying number from an identification document (e.g. non-expired U.S. driver’s license, U.S. identification document, U.S. passport, or non-U.S. passport)
  • Name of state or jurisdiction that issued the identification document
  • PDF of identification document

4. Applicability of CTA reporting requirements to trusts

• Trusts generally have no direct reporting requirements because they are not considered a “reporting company”; however, if a trust owns an interest in a reporting company, the following people or entities may also be required to report their information as a “beneficial owner”:
  • The Trustee(s) of the trust
  • A trust beneficiary if the beneficiary is either (i) the sole permissible recipient of income and principal or (ii) has the right to demand a distribution of, or withdraw, substantially all of the trust assets
  • The trust’s grantor, if they retained the right to revoke the trust or withdraw the trust’s assets

5. FinCEN Identifier to reduce the amount of information required in a report

• The rules allow a beneficial owner or company applicant to obtain an identification number that may be disclosed by a reporting company instead of  the multiple pieces of information otherwise required (as discussed above).
• This “FinCEN identifier” is a unique identifying number issued by FinCEN to an individual after such individual provides the same information that would be required in a CTA report if there was no FinCEN identifier.
• The beneficial owner who obtains a FinCEN identifier will be responsible for keeping their information current. 

6. Deadlines for filing a BOI report

• For an existing reporting company as of January 1, 2024 — the initial report is due on or before January 1, 2025.
• For a reporting company created or registered to do business in the U.S. between January 1, 2024 and December 31, 2024 — the initial report is due within 90 calendar days of receiving actual or public notice that the creation or registration is effective.
• For a reporting company created or registered to do business in the U.S. on or after January 1, 2025 —  the initial report is due within 30 calendar days of receiving actual or public notice that the creation or registration is effective.
• In addition to the initial reporting requirement, reporting companies must report changes or corrections to any filing within 30 days after becoming aware or having reason to know of any inaccuracy or changes in any prior report.

7. Fees and penalties under the CTA

• There is no filing fee associated with filing a report under the CTA.
• Non-compliance with reporting requirements may incur a civil penalty of up to $500/day and a criminal fine of up to $10,000, imprisonment of up to two years, or both.

The rules and regulations issued in connection with the CTA have broad application and are complex. In addition, some of the original rules have changed recently, and there could be more changes to come. It’s important to consult with a qualified professional to see if and how the CTA requirements apply to you. If you own an interest in a reportable company or are the grantor, beneficiary or trustee of a trust that owns an interest in a reportable company, reach out to your attorney or accountant as soon as possible for guidance on reporting. 

Leslie Kehoe is a senior wealth strategist for CIBC Private Wealth in Atlanta with 25 years of industry experience.