August 5, 2024
Federal legislation known as the “Corporate Transparency Act” now requires most small business entities to register with the federal government. The Act is intended to help law enforcement combat money-laundering and other criminal activity. All “beneficial owners” of small business entities are required to provide their date of birth, current address, and identifying documents (“beneficial ownership information” or “BOI”) to FinCEN (Financial Crimes Enforcement Network), a federal law enforcement agency. The fines for failing to comply are substantial so it is important that you take action.
At your earliest convenience, please complete the attached fillable form and submit it to our secure link. To ensure timely processing, all forms requesting assistance must be received by our office no later than September 6, 2024.
As you complete the form, here are some basic questions and answers about the new registration requirements:
Q: Who is required to register?
A: All business entities created by filing documents with the Secretary of State are required to register unless they qualify for an exemption. This includes limited liability companies, corporations, limited partnerships, and limited liability partnerships. Sole proprietorships, general partnerships, and nonprofit organizations are NOT required to register.
Q: What entities are exempt from registration?
A: Nonprofit organizations are exempt. In addition, there are three primary exemptions from the registration requirement for for-profit entities. Large employers, highly regulated entities, and certain wholly owned subsidiaries are not required to register. Large employers are entities who directly (not on a consolidated or affiliated basis) employ more than 20 employees on a full-time basis in the United States, have filed a federal income tax return in the previous year demonstrating more than $5,000,000 in gross receipts or sales in the aggregate, and have an operating presence at a physical office within the United States. Highly regulated entities who are already subject to these kinds of rules, such as banks and insurance companies. The exemption for subsidiaries applies to subsidiary entities who are wholly owned and controlled by an entity that is exempt. A full list of the exemptions can be found in FinCEN’s Small Business Entity Compliance Guide.
Q: What information is required to be provided to FinCEN?
A: Certain information is required for the entity itself, including the Tax Identification number. In addition, each “Beneficial Owner” of the entity must provide date of birth, current address, and a copy of an identifying document (driver’s license, passport, etc.). All this information is submitted electronically through FinCEN’s web portal.
Q: Who is a “Beneficial Owner” of an entity?
A: A “Beneficial Owner” of an entity is any individual who, directly or indirectly, meets at least one of the following criteria: (a) exercises “substantial control” over the entity; or (b) owns or controls at least 25% of the ownership interests of the entity. “Substantial control” is broadly defined to mean (1) service as a senior officer, (2) authority over the appointment or removal of any senior officer or of a majority of the board of directors (or other similar governing body) of the entity, (3) power to direct, determine or decide or to exert substantial influence over, important matters of the entity, or (4) any other form of substantial control. The term “senior officer” means any individual holding the position or exercising the authority of a president, chief financial officer, general counsel, chief executive officer, or chief operating officer, or any other officer, regardless of official title, who performs a similar function. Beneficial Owners may also include individuals that hold ownership interests in an entity through a trust or similar arrangement as well as those owning or controlling one or more intermediate entities that separately or collectively own or control ownership interests of an entity. The rules and guidance for some of these situations are still being developed.
Q: What are the deadlines to register?
A: Entities formed on or after January 1, 2024, must register within 90 days of creation or registration. Entities created or registered before January 1, 2024 must register before January 1, 2025. Entities created or registered after January 1, 2025, must register within 30 days.
Q: Is this just a one-time registration requirement?
A: No! After the initial registration, the information on file must be updated within 30 days after a change. This includes reporting new address information for the entity or for beneficial owners and reporting changes in the persons who are the beneficial owners of the entity. It will be important to monitor these changes carefully and make prompt updates.
Q: What are the consequences for failing to comply?
A: The Corporate Transparency Act imposes penalties for noncompliance which include fines of up to $500 per day.
Q: Can I do this on my own?
A: Yes, if you are comfortable you understand the requirements, you can register on your own by going to www.fincen.gov and filing the required information.
Q: How can Rembolt Ludtke help?
A: For entities created by our office since January 1, 2024, we are making sure the initial registration is completed as part of the formation process. For entities created or registered before January 1, 2024, we are available to assist you in determining if registration is necessary and identifying the individual “beneficial owners” required to register. If you would like our assistance, simply check the appropriate box on the attached form and return it by email to boi@remboltlawfirm.com. We will contact you for any additional information we need, which may include the tax identification number for the entity and/or the social security number of an owner. If you have questions and would like to visit with someone from our office, please contact the attorney you normally work with at the firm.
Q: What other entity compliance services are available from Rembolt Ludtke?
A: The firm provides a variety of services related to entity compliance, including serving as registered agent, filing biennial reports, and preparing annual minutes. If you are interested in learning more about these services, check the appropriate box on the attached form and return it by email to boi@remboltlawfirm.com
Q: What do entity compliance services from Rembolt Ludtke cost?
A: FinCEN Registration for New Entity: Included in overall project cost.
If any of your questions are not answered in the FAQ above, please email boi@remboltlawfirm.com
