Client Alert: Corporate Transparency Act

The new Corporate Transparency Act (CTA) imposes requirements to register Limited Liability Companies (LLCs) and other entities (such as corporations, limited partnerships, and certain trusts) and their beneficial owners with the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), the federal agency charged with reducing and investigating financial crimes. If your existing LLCs, corporations, or LPs were formed prior to January 1, 2024, and do not qualify for an exemption, then you have until January 1, 2025, to file a report with FinCEN. If you have LLCs, corporations, or LPs that were formed during calendar year 2024 and that do not qualify for an exemption, then you have until 90 days after the date of formation to file a report with FinCEN. The CTA imposes civil and criminal penalties for failure to comply.

While our clients will need to do the actual online filings with FinCEN (or retain a third-party services provider to do so), we will of course be pleased to provide assistance and analysis on the CTA and how to complete this filing (including determining whose personal information needs to be provided where interests in the entities are held by trusts). If you would like to discuss this, please contact me at aabrahams@meyershurvitz.com.

This alert describes new reporting obligations for certain entities under the CTA and the related services that Meyers Hurvitz Abrahams LLC (MHA) can provide to support you. The CTA took effect on January 1, 2024, and carries both civil and criminal penalties for failure to comply. As a result, this requires your attention and possibly additional action. Please review this information and call us with any questions.

Summary

As of January 1, 2024, the CTA requires many existing and newly formed entities to file Beneficial Ownership Information Reports (BOI Reports) with FinCEN. MHA can advise you about your reporting obligations and provide information to be reported in BOI Reports.

Overview

The purpose of the CTA is to prevent illicit activities (such as money laundering and terrorist financing) by providing information to select government agencies and financial institutions about the beneficial ownership of certain business entities. Under the CTA, a “Reporting Company” must file BOI Reports with FinCEN disclosing information about the company, its “Beneficial Owners,” and the “Company Applicants” who established the entity. Because each legal separate entity may be a Reporting Company, the reporting requirements will apply separately to each Reporting Company; in other words, there may be multiple Reporting Companies with common or interlocking ownership, and separate reports may be required for each separate Reporting Company.

Information disclosed on a BOI Report is stored in a secure, non-public database that applies security controls used by the federal government to protect non-classified information at the highest security level. This information may be disclosed only to certain governmental agencies and authorities or, in limited circumstances, to financial institutions.

Reporting Company

A Reporting Company is an entity that is formed by a state filing (e.g., a corporation or limited liability company) that is not exempt from reporting under the CTA. Entities that are exempt from the CTA include large operating companies, tax-exempt entities, certain categories of investment entities, and certain other regulated entities. A foreign entity that is registered to do business in the United States is considered a Reporting Company if it is not exempt under the CTA.

Beneficial Owner

A Beneficial Owner is any individual who directly or indirectly exercises substantial control over a Reporting Company or beneficially owns or controls 25% or more of a Reporting Company’s ownership interests. An individual who exercises substantial control over a Reporting Company could be (1) a senior officer or manager, (2) an individual with authority to appoint or remove officers, managers, or directors, or (3) an individual with authority to make important decisions for the Reporting Company. Certain individuals are excluded as Beneficial Owners, including (a) minor children, (b) nominees, agents, and custodians, (c) employees who do not otherwise have substantial control, (d) individuals with mere inheritance interests, and (e) creditors. Ownership interests in a Reporting Company could be stock, capital or profits interests, options, or another mechanism to acquire ownership. Trustees, grantors, and beneficiaries of trust, as well as certain other persons with power over trusts, that hold interests in a Reporting Company may be Beneficial Owners.

Company Applicants

One Company Applicant is the individual who filed the document to create or register the Reporting Company, such as an employee of the service provider that facilitated the formation.

The other Company Applicant is the individual who is primarily responsible for directing or controlling the formation filing, such as the manager of the entity or an attorney involved with the entity’s formation.

Information Disclosed on BOI Report

A Reporting Company must report the following information about itself:

• Its legal name
• Its trade names or “DBAs”
• Current street address of its principal place of business
• Jurisdiction of its formation
• Its Tax Identification Number

A Reporting Company must report within 30 days subsequent changes to the information it has previously reported. Unlike some other reporting requirements (e.g., annual reports to Secretaries of State), the requirement to update reported information is triggered by any change in the previously reported information. This will require you to monitor any changes to ensure prompt compliance with these requirements.

Filing Deadlines

Currently, BOI Reports must be filed by Reporting Companies by the following deadlines:

If the information changes after it is reported, the Reporting Company must update its BOI Report within 30 days after the change to avoid penalties.

FinCEN Identifiers – Potential Simplification of Reporting

Any individual may apply for a FinCEN Identifier to simplify reporting. A FinCEN Identifier is a unique identification number issued by FinCEN to an individual. An individual may obtain a FinCEN Identifier online through FinCEN’s website by submitting the individual’s personal information.

An individual’s FinCEN Identifier can be used on each BOI Report instead of the individual’s personal information. If an individual is, for example, a Beneficial Owner of multiple Reporting Companies, the individual can update the information about him or her previously reported to FinCEN whenever that information changes. Then none of the Reporting Companies for which that individual is a Beneficial Owner must separately update their BOI Reports when previously reported information about the individual changes (other than where that individual ceases to be a Beneficial Owner).

Meyers Hurvitz Abrahams LLC Services Related to the CTA

Upon your specific request, we may agree to expand the MHA engagement to assist you with CTA requirements. Our expanded engagement agreement must be set forth in writing (including by email). The writing must specify the particular services MHA will undertake to provide. Those services may include any or all of the following:

• Assist with formation of new entities.
• Advise on whether an entity is a Reporting Company that has reporting obligations.
• Advise on the identity of Beneficial Owners.
• Provide entity and personal information from the legal file that is to be included on a BOI Report filed by the Reporting Company or a third-party service; that information must be independently verified before it is reported.
• Provide personal information from the legal file that is to be included on a FinCEN Identifier application filed by an individual or third-party service; that information must be independently verified before the application is submitted.
• Advise about the impact of changes such as mergers, acquisitions, transfers of equity interests, and updates to personal information on reporting obligations.

If you would like MHA to assist with any of the above, please contact Adam Abrahams, Esq., who can work with you to modify your written engagement agreement with the firm.

Please be aware that MHA will require a separate retaining agreement for any guidance or filings in connection with FinCEN or the Corporate Transparency Act as well as a separate retainer for preparing and filing corporate documents. Otherwise, MHA will not:

• File formation documents directly with state agencies.
• File BOI Reports directly with FinCEN.
• File FinCEN Identifier applications directly with FinCEN.
• Monitor ongoing CTA compliance or track changes in Beneficial Owner information.
• Verify information that is included on a BOI Report or FinCEN Identifier application.