In 2021 Congress Passed the Corporate Transparency Act, requiring a new level of reporting for business owners called Beneficial Ownership Interest Reporting. Starting January 1, 2024, entities, such as LLCs and Corporations, must disclose to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), information about the individuals who own interest in the entity. These businesses, referred to as “Reporting Companies,” are required to submit a filing to FinCEN that discloses their owner’s names, address, and copy of their driver’s license or passport. Failure to report this information can result in severe penalties, including a fine of $500 per day, as well as potential civil and criminal penalties.
As of March 1, 2024, Alabama Federal courts have ruled the Corporate Transparency Act to be unconstitutional. The court argues state’s rights – that Congress does not have the power to regular entities registered at the state level. United States District Judge, Liles C. Burke writes, “This case presents a deceptively simple question: Does the Constitution give Congress the power to regulate those millions of entities and their stakeholders the moment they obtain a formal corporate status from a state?”
While additional states may follow Alabama’s ruling against the CTA, we believe that FinCEN will uphold the filing requirements. If you are a Beneficial Owner of a company (described below), we strongly encourage you to discuss this reporting with your legal counsel. Heritage is committed to supporting our clients as they navigate through these new reporting requirements with a legal professional. We are pleased to answer questions or help to connect you to a legal professional who can assist with these requirements. It is recommended that all clients who are Beneficial Owners obtain a unique FinCEN ID (an anonymous number that can be used by a Beneficial Owner) rather than disclosing this information for each entity report. You can go to the FinCEN website (https://FinCENid.FinCEN.gov/landing) and request a FinCEN ID. An electronic copy (a PDF or JPG image is acceptable) of your driver’s license or passport will be needed for upload.
Reporting Companies:
Any business or entity that is licensed by the State or U.S. This includes partnerships operating as LLCs, Corporations, Pass-through entities, etc. are required to report the beneficial ownership interest. Importantly, this does not include entities like trusts, unless the trust is registered with the state or federal government as a specific business entity. It also does not include Sole Proprietorships (LLCs or businesses with a single owner) and disregarded entities (like Revocable Trusts, Rental Real Estate, etc.)
Beneficial Ownership:
A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests.
The Reporting Company will be required to report the beneficial owner’s name, address, and a copy of a valid government issued ID, such as their driver’s license or passport.
Filing Requirement:
If your company existed before January 1, 2024, it must file its initial beneficial ownership information report within one year, by January 1, 2025.
If your company was created or registered on or after January 1, 2024, then it must file its initial report within 90 calendar days.
Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days to file after receiving actual or public notice that its creation to register is effective.
More Information:
There are a number of exemptions to this reporting, both for Reporting Companies and Beneficial Owners. For more information, please visit the links below to fincen.gov.
FinCEN Beneficial Ownership Information Home Page
Introduction to Beneficial Ownership Information Reporting
FinCEN FAQs regarding Beneficial Ownership Information Reporting
