Severe Penalties – Potential Criminal Charges

We are writing this letter to emphasize to our clients and others on the mailing list the importance of complying with the Corporate Transparency Act (CTA). The CTA requires the reporting of beneficial ownership information (BOI). The information reporting is non-accounting information which serves to identify the reporting company, beneficial owners and the company applicant. The type of information to be reported includes the following (not a complete list of information reporting requirements).

Reporting Company:

  • Full legal name
  • Trade name or “doing business as” DBA name
  • Complete current US address
  • State, Tribal or foreign jurisdiction of formation.
  • For a foreign reporting company only – the State or Tribal jurisdiction of first registration
  • IRS taxpayer identification number (TIN) or if a foreign reporting company that has not been issued a TIN, a tax identification number issued by a foreign jurisdiction and the name of the jurisdiction.

Each Beneficial Owner and some Company Applicants

  • Full legal name
  • Date of birth
  • Complete current address

Unique identifying number and issuing jurisdiction from, and image of, one of the following non-expired documents:

  • U.S. Passport
  • State driver’s license
  • Identification document issued by a state, local government, or tribe
  • If the individual does not have any of the previous documents, foreign passport

Your Company needs to set up procedures to obtain and track this information on a contemporaneous basis because the reporting requirements are stringent and penalties severe for failure to timely comply. Generally, the following timeline for filing is as follows:

Initial Reports

A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial beneficial ownership information report.

A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report. This 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.

Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports with FinCEN.

Updated Reports

If there is any change to the required information about your company or its beneficial owners in a beneficial ownership information report that your company filed, your company must file an updated report no later than 30 days after the date of the change.

A reporting company is not required to file an updated report for any changes to previously reported information about a company applicant.

Note that updated reports are required no later than 30 days after the date of change – this rule applies once the initial report has been filed.

Changes Requiring Updated Reports

The following are some examples of the changes that would require an updated beneficial ownership information report (not all inclusive):

Any change to the information reported for the reporting company, such as registering a new business name.

A change in beneficial owners, such as a new CEO, or a sale that changes who meets the ownership interest threshold of 25 percent.

Any change to a beneficial owner’s name, address, or unique identifying number previously provided to FinCEN. If a beneficial owner obtained a new driver’s license or other identifying document that includes a changed name, address, or identifying number, the reporting company also would have to file an update beneficial ownership information report with FinCEN, including an image of a new identifying document.

Who Must File

There are some exclusions to filing. The details of determining if an exclusion applies are well beyond the scope of this letter. The following entities must go to the FinCEN website in order determine if they are required to file.

Companies required to report are called reporting companies. There are two types of reporting companies:

Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.

Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.

There are 23 type of entities that are exempt from the reporting requirements. Carefully review the qualifying criteria before concluding that your company is exempt.

Penalties for Noncompliance

As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. That person may also be subject to criminal penalties of up to two 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.

The contemporaneous reporting requirements make it such that the only possibility to comply with those onerous time requirements is for the affected entities to establish rigorous monitoring and reporting procedures. Therefore, we have determined that Bull & Associates will not accept engagements to file the BOI reports. The actual report is of non-financial information and the difficult part is the monitoring to establish when a change occurs requiring an updated report which is a task only the affected entity can perform.

If you believe these requirements place an undue burden on small business enterprises, we encourage you to contact your U.S. Congress representative and Senators. That is perhaps the best way to affect a change.

Disclaimer – The information included in this email does not constitute information to be utilized for filing or reporting BOI information. It is only to make you aware that you may have a reporting requirement. Consult an attorney for legal advice or go to the FinCEN website for detailed information for reporting requirements your company may have.