{"id":16795,"date":"2024-01-03T16:02:01","date_gmt":"2024-01-03T22:02:01","guid":{"rendered":"https:\/\/www.sfw.cpa\/news-and-guides\/?p=16795"},"modified":"2024-01-03T10:02:01","modified_gmt":"2024-01-03T16:02:01","slug":"businesses-do-you-have-to-comply-with-the-new-corporate-transparency-reporting-rules","status":"publish","type":"post","link":"https:\/\/www.sfw.cpa\/news-and-guides\/businesses-do-you-have-to-comply-with-the-new-corporate-transparency-reporting-rules\/","title":{"rendered":"Businesses: Do you have to comply with the new corporate transparency reporting\u00a0rules?"},"content":{"rendered":"

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Your business may soon have to meet new reporting requirements that take effect on January\u00a01, 2024. Under the Corporate Transparency Act (CTA), enacted in 2021, certain companies will be required to provide information related to their \u201cbeneficial owners\u201d \u2014 the\u00a0individuals who ultimately own or control the company \u2014 to the Financial Crimes Enforcement Network (FinCEN). Failure to do so may result in civil or criminal penalties, or\u00a0both.<\/p>\n

On November\u00a029, FinCEN announced it was amending the beneficial ownership information (BOI) reporting\u00a0rules.<\/p>\n

Understanding the CTA<\/strong><\/p>\n

The CTA is intended to reduce exposure to serious crimes, including terrorist financing, money laundering and other nefarious activities. But it could also open the door to the inspection of family offices, investment angels and other private individuals who\u2019ve generally been shielded from scrutiny in the past. A business that\u2019s characterized as a\u00a0\u201creporting company\u201d has either 30\u00a0days or one year to comply with the new\u00a0rules.<\/p>\n

The CTA\u2019s rules generally apply to both domestic and foreign privately held reporting companies. For these purposes, a reporting company includes any corporation, limited liability company or other legal entity created through documents filed with the appropriate state authorities. A foreign entity includes any private entity formed in a foreign country that\u2019s properly registered to do business in the United\u00a0States.<\/p>\n

The complete list of entities that are exempt from the reporting rules is too lengthy to include here \u2014 ranging from government units to not-for-profit organizations to insurance companies and more. Notably, an exemption was created for a \u201clarge operating company\u201d that employs more than 20 employees on a full-time basis, has more than $5\u00a0million in\u00a0gross receipts or sales (not including receipts and sales from foreign sources), and physically operates in the United States. However, many of these companies already must\u00a0meet other reporting requirements providing comparable information.<\/p>\n

If an entity initially qualifies for the large operating company exemption but subsequently falls short, it must then file a BOI report. On the other hand, an entity that might not currently qualify can update its status with FinCEN if it later does and obtain an exemption.<\/p>\n

Determining who is and isn\u2019t a beneficial owner<\/strong><\/p>\n

Under the CTA, a nonexempt entity must provide identifying information about its beneficial owners. A beneficial owner is defined as someone who, directly or indirectly, exercises substantial control over a reporting company, or owns or controls at least 25% of its ownership interests. An individual has substantial control of a reporting company if he\u00a0or\u00a0she:<\/p>\n