Attention: New CTA Filing Requirement

Who Must File

Both domestic and foreign reporting companies are required to file reports. A company is considered a reporting company if a document was filed with the Pennsylvania Department of State Corporation Bureau or similar office to create or register the entity. Corporations, including S corporations, LLCs, and other entities are subject to the reporting requirements. Please note, because sole proprietorships, trusts, and general partnerships do not require the filing of a formal document with the Department of State, they generally are not considered a reporting company and will not have a filing requirement. Foreign companies are required to file reports if they are registered with the Department of State or similar office under state law.
Some companies are exempt from reporting, but many of the exempted companies are already required to report ownership information to a governmental authority. Of particular interest to you may be the exemption for large operating companies. A large operating company is any entity with (a) more than 20 full-time US employees, (b) an operating presence at a physical office within the US, and (c) more than $5,000,000 of US-sourced gross receipts reported on its prior year federal income tax return. If you meet all three (3) of these qualifications, you are not subject to the new reporting requirements. If you do not meet all three (3) qualifications, you may be required to file.

What Information Must be Provided

Beneficial ownership information (BOI) must be reported for the reporting company’s beneficial owners and (for entities formed or registered after 2023) company applicants. BOI includes an individual’s full legal name, date of birth, street address and a unique ID number. The unique ID number can be from a non-expired US passport, state driver’s license, or other government-issued ID card. If the individual does not have any of those documents, then a non-expired foreign passport can be used. An image of the document showing the unique ID number must also be included with the report.

Beneficial Owners

Two groups of individuals are considered beneficial owners of a reporting company: (1) any individual who directly or indirectly owns or controls at least 25% of the ownership interests of the reporting company; or (2) any individual who exercises substantial control over the reporting company.

Individuals with substantial control are those with substantial influence over important decisions about a reporting company’s business, finances, and structure. Senior officers (president, CFO, general counsel, CEO, COO, and any other officer who performs a similar function) are automatically deemed to have substantial control, as are individuals with the authority to appoint or remove senior officers and board members. There is no requirement that these individuals have actual ownership in the company to be a considered a beneficial owner for reporting purposes.

Company Applicants

The company applicant is the person who actually files the document that creates or registers the reporting company (e.g., an attorney). Company applicants must provide the same information that is required of beneficial owners, but only if the reporting company is formed or registered after 2023. Because of the difficulty in tracking down information about company applicants for reporting companies that have been in existence for a number of years, reporting companies formed or registered before 2024 do not have to supply BOI for their company applicants.

FinCEN Identifiers

Individuals and reporting companies can request a FinCEN Identifier (FinCEN ID) to use in place of supplying detailed information on the report. A FinCEN ID is a unique number assigned by FinCEN which is obtained by submitting the same information as is required of a beneficial owner or reporting company. A FinCEN ID may be useful to individuals that prefer to send their personal information directly to FinCEN rather through a reporting company, or to individuals that may be required to supply information as a beneficial owner or company applicant of several reporting companies.

Important Filing Dates

For existing reporting companies created or registered before 2024, the initial report is due by January 1, 2025. For reporting companies created or registered in 2024, the initial report is due 90 days after the entity’s creation or registration. For reporting companies created or registered after 2024, the initial report is due 30 days after the entity’s creation or registration.

If there is a change to previously reported information about the reporting company or its beneficial owners, an updated report must be filed within 30 days of the change. So, it is imperative that your company implement a system to identify reportable changes and file an updated report with FinCEN in a timely manner.

Penalties for Failing to Comply

The penalties for willfully failing to file both initial and updated reports are steep – $500 per day the report is late, adjusted annually for inflation. A person who willfully violates may also be subject to criminal penalties of up to two (2) years imprisonment and a fine of up to $10,000.

Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.

How to File

BOI reports must be filed electronically. FinCEN’s e-filing portal, available at https://boiefiling.fincen.gov/, provides two methods to submit a report: (1) by filling out a web-based version of the form and submitting it online, or (2) by uploading a completed PDF version of the BOI report. Some third-party service providers may also offer the ability to file the BOI report through their software. The person who submits the BOI report will need to provide their company applicant information to FinCEN. There is no fee for filing the report if you do it yourself.

FinCEN has a Small Entity Compliance Guide and frequently asked questions to help guide businesses through the reporting requirements. These are available at https://www.fincen.gov/boi/small-business-resources.

Kozloff Stoudt Attorneys is available to assist clients seeking professional assistance with their BOI filing. Advisory services are tailored to ensure compliance with current CTA regulations, contingent upon the accuracy and completeness of the information provided.

If you have any questions about these new reporting rules, how they affect your business, or would like our assistance with filing your BOI report, please contact our office, we are here to provide support and guidance.

Sincerely,

Kozloff Stoudt Attorneys