The Good News provides a monthly column with important content having to do with topics from the legal community. This month features a conversation with Marianna Seiler DeJager, director with Tripp Scott.
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Do you own a small business – that is not a sole proprietorship – in Florida or anywhere else in the US (or its territories)?
You almost certainly need to know about – and comply with – the Corporate Transparency Act (CTA), a new federal law that took effect January 1 of this year, despite a recent successful – but limited – court challenge.
Bill Davell – What is the Corporate Transparency Act, and what is its purpose?
Marianna Seiler DeJager – The Act requires companies such as corporations or limited liability companies that file with a state’s secretary of state or similar entity – so-called “reporting companies” – to also file a “Beneficial Ownership Report” with the Financial Crimes Enforcement Network (FinCEN), a unit of the U.S. Department of Treasury.
Congress passed the CTA as part of a larger bill in an effort to prevent criminal or terrorist organizations to hide activities such as money laundering, tax fraud, funding activities or other illegal acts behind shell companies.
BD – Are any companies exempted?
MSD – Publicly held companies or those already covered by other financial regulations, including tax-exempt entities – as listed on FinCEN’s website (FAQ C. 2.) – do not have to file.
BD – When must our company file?
MSD – Companies formed before January 1, 2024 must file an initial report before January 1, 2025. Entities formed on or after January 1, 2024, must file within 90 calendar days of receiving actual or public notice that its registration is effective. Reporting companies formed on or after January 1, 2025, must file an initial report within 30 calendar days.
BD – What information has to be filed?
MSD – The Beneficial Ownership Report, as its name suggests, requires the company to identify a range of individuals qualifying as “beneficial owners” under CTA’s definition. The report must also include:
- the entity’s full name and any trade or “doing business as” (d/b/a) name
- its principal address
- where it was formed or registered and
- its Tax ID number.
BD – Who is a “beneficial owner?”
MSD – “Beneficial owners” under CTA are those who:
- directly or indirectly exercise substantial control over the reporting company, which FinCEN defines as being a “senior officer;” having the ability to make important decisions; on behalf of the reporting company; having “appointment or removal authority” over any senior officer; or falling within a vaguely defined “catch-all” category to capture “new and unique ways” to exercise control, or
- own or control 25% or more of various ownership interests.
The company may also have to identify intermediaries, custodians or agents under certain circumstances, especially if the beneficial owner is a trust or, for a company formed on or after January 1, 2024, that individual registered the entity.
BD – How does our company file?
MSD – Companies may file online. Online applications and PDFs that can be uploaded are available at https://boiefiling.fincen.gov/fileboir.
BD – How often must we file?
MSD – Companies only need to file one Beneficial Ownership Report but are required to update it in the case of certain changes including a new business name, a change in beneficial owners, and even a change to a beneficial owner’s name, address, or unique identifying number.
BD – What happens if we don’t file or keep the form updated?
MSD – Serious consequences can result for a person or company who willfully violates reporting requirements: civil penalties of up to $500 for each day that the violation continues, criminal penalties of up to two years imprisonment and a fine of up to $10,000. Such violations can include not just failing to file but also willfully filing false beneficial ownership information or failing to correct or update previously reported beneficial ownership information. And both the person responsible for such actions or inactions and senior officers can be held liable.
BD – What about the recent court decision? Does it affect the requirement that I file?
MSD – A federal district court in Alabama recently held that the CTA was unconstitutional because it exceeded Congress’s authority. However, the court enjoined enforcement of the Act only in regard to the individual plaintiff and members of the National Small Business Association (NSBA) while the case is being appealed. Unless your company is a member of NSBA, you should plan on complying with CTA by the deadline until further notice.
BD – What if I need help?
MSD – Tripp Scott’s attorneys are ready to help existing and new clients with more detailed materials we have prepared as well as the actual filing. Contact us at 954-525-7500 or via https://www.trippscott.com/contact-us.
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Read more Ask Bill at: https://www.goodnewsfl.org/author/william-c-davell/
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