Is your small business in compliance with the Corporate Transparency Act?
Congress enacted the “Corporate Transparency Act” (CTA) in 2021, in an effort to reduce money laundering through the use of shell entities, through required disclosures for every non-public business entity registered under the laws of any state or U.S. territory. This reporting focuses on identifying the actual owners of, and decisionmakers for, these entities. Each business entity formed prior to January 1, 2024, must make report to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) by January 1, 2025; each entity formed on or after January 1, 2024, must make a report within 90 days of formation.
Fortunately, this is a free process that you can do yourself in just a few minutes via FinCEN’s online “Beneficial Ownership Information” (BOI) submission form.
What will I need to provide?
- The formation info for the LLC (formation date), which, in the case of Virginia entities, can be found on the Virginia State Corporation Commission website;
- The EIN (federal taxpayer ID) for the entity (if you are unable to locate this, then ask your tax preparer for a copy of a prior income tax return for the entity); and
- Your identifying info from your Driver’s license or Passport. Note that you will need to upload a scan of either of these documents.
Who needs to provide identifying information?
Every person associated with the business entity that the CTA considers a “beneficial owner” of the company will need to provide their information. Chapter 2 of FinCEN’s handy Small Business Compliance Guide goes through who must be reported as a “beneficial owner.” Generally, it boils down to any individual who
- Exercises substantial control over the company” – including a “manager” making business decisions like whether to accept or decline work or contracts; or
- Owns or controls at least 25% of the company’s ownership interests.
What if I am involved with multiple business entities?
If you are a “beneficial owner” in multiple business entities (and, remember, a filing needs to be made for every entity), then you might find it more efficient to first obtain a “FinCEN Identifier.” After entering your identifying information with a scan of your ID or passport, you will receive the FinCEN Identifier immediately to use in lieu of entering your information and uploading the documents for every report. If you are making a report for a business entity with multiple “beneficial owners,” then each can apply for his or her own FinCEN Identifier to provide you with.
While no one enjoys additional requirements and deadlines, FinCEN has at least made this one a relatively easy box to check; however, we can help navigate any questions that you might have.