No More Hiding Behind the Corporation

All businesses must register with the Financial Crimes Enforcement Network. Failure to do so will be costly.

BY DAVID L. OBERG, ESQ. AND MADISON B. OBERG, ESQ.

Anew federal law called the Corporate Transparency Act (“CTA”) aims to compile a nationwide database of all entities—corporations, limited liability companies, etc.— that are doing business in any US state. The intention is to establish a single, central database that the US Government may use to determine who really owns and controls each organization. By enabling the government to truly know who owns and controls each tier of a corporate structure, it will be easier for it to fight financial crimes such as tax evasion, terrorism, and money laundering.

All business entities, unless they are exempt, are now required to submit a Beneficial Ownership Report (the “Report”) to the Department of Treasury’s Financial Crimes Enforcement Network (the “FinCEN”) in accordance with the CTA.

The portal to create a FinCEN registration number and file the Report is available via this link (www.fincen.gov/boi).

Who Has to File an Initial Report?

A “reporting company” is any organization that is established by submitting paperwork to the appropriate Secretary of State or other government agency. This includes companies formed in the United States, and foreign entities that are registered to do business in the United States. There are currently 23 exceptions to this rule for some organizations such as charities, publicly traded companies, big businesses with 20 or more employees and annual sales of $5 million or more, banks and financial institutions, and other organizations that are already heavily regulated.

Further detail on these exemptions can be found on page 4 of the FinCEN’s Small Entity Compliance Guide (www.fincen.gov). Therefore, single-member LLCs, professional corporations, family-owned enterprises, and LLCs formed specifically for the purpose of holding real estate may all be considered “reporting companies.”

When is the Report Due?

Organizations established prior to January 1, 2024, have until January 1, 2025, to finalize their Report. Organizations created between January 1, 2024, and December 31, 2024, have 90 days from the date of entity establishment to finish their report. Entities created on or after January 1, 2025, shall have 30 days from the date of wentity formation to file their report.

Importantly, if there are any changes to the Report, those changes must be reported within 30 days.

What Goes Into the Report?

The Report’s contents are all intended to be kept private. The following details about the entity and the people who own and manage it will be included in the report. Business information will include:

• Legal name and any DBA’s or trade names.

• Street address for entity’s principal place of business (where the actual business is operated, not the address you list for mail. So, if you operate your business from your house but have mail go to a third-party mailbox, you must list your home address).

• State of formation.

• EIN—if your entity does not have an EIN, the entity will need to get one.

The beneficial owner must report the following:

• Full legal name.

• Date of birth.

• Home address (actual address where they live).

• A PDF copy of the individual’s passport or driver’s license.

In addition, entities formed on and after January 1, 2024 will be required to disclose information