Beneficial Ownership CLB The Community Bank

Beneficial Ownership Overview

As of January 1, 2024, a significant number of businesses are required to comply with the Corporate Transparency Act (CTA). The CTA was enacted into law as part of the National Defense Act for Fiscal Year 2021. The CTA requires the disclosure of the beneficial ownership information (also known as BOI) of certain entities from people who own or control a company.

The intent of the BOI reporting requirement is to help U.S. law enforcement combat money laundering, the financing of terrorism, and other illicit activity. Most small businesses are affected by the new reporting requirement.

CTA is part of the Bank Secrecy Act, a federal law that requires record-keeping and report filing on certain types of financial transactions. BOI reports will not be filed with the IRS, but with the Financial Crimes Enforcement (FinCEN), which is an agency of the Department of Treasury.

Below is some preliminary information for you to consider as you approach the implementation period for this new reporting requirement. This information is general only and should consult with your legal counsel or CPA before applying to your specific facts and circumstances.

Which entities are required to comply with the CTA’s BOI reporting requirement?

Entities organized both in the U.S. and outside the U.S. may be subject to the CTA’s reporting requirements. Domestic companies required to report include corporations, limited liability companies (LLCs) or any similar entity created by the filing of documents with a secretary of state or any similar office under the law of a state or Indian tribe.

Foreign companies required to report under the CTA include corporations, LLCs or any similar entity that is formed under the law of a foreign country and registered to do business in any state or tribal jurisdiction by filing a document with a secretary of state or any similar office.

Who is exempt from the filing requirement?

Exemptions include publicly traded companies, banks and credit unions, securities brokers/dealers, public account firms, tax-exempt entities and certain inactive entities just to name a few. Large operating entities are exempt from filing if they meet the following criteria:

Employe more than 20 people in the U.S.
Have reported gross revenue (or sales) of over $5 million on the prior year’s tax return, and
Be physically present in the U.S.

Who is the beneficial owner?

Any individual who, directly or indirectly, either:

Exercises substantial control over a reporting company, or
Owns or controls at least 25 percent of the ownership of the reporting company.

An individual has substantial control of a reporting company if they direct, determine, or exercise substantial influence over important decisions of the reporting company. This includes any senior officers regardless of formal title or if they have no ownership interest in the reporting company.

When must companies file?

New entities created in 2024 must file within 90 days of registering with the secretary of state.
New entities created after December 31, 2024, must file within 30 days of registering with the secretary of state.
Existing entities created and registered with the secretary of state must file by January 1, 2025.
Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports must file within 30 days.

What information is required to be reported?

Companies must report the following information:

Full name of the reporting company
Any trade name or doing business as (DBA) name
Business address (physical address)
State or tribal jurisdiction of formation
IRS taxpayer identification number (TIN)

Information on the beneficial owners of the entity and for newly created entities are required to report the name, birthdate, address, and unique identifying number and issuing jurisdiction from an acceptable identification document (i.e. driver’s license or passport) and an image of such document.

Penalty for not complying:

PENALITIES FOR WILLFULLY NOT COMPLYING WITH THE BOI REPORTING REQUIREMENT CAN RESULT IN CRIMINAL AND CIVIL PENALITIES OF $591 PER DAY AND UP TO $10,000 WITH UP TO TWO YEARS OF JAIL TIME.

Recommendations

The bank recommends each legal entity, including but not limited to LLCs, LPs, and Corporations, assess the need to file the applicable report with FinCEN in a timely manner. If reporting is required, the report may be filed online at https://fincen.gov/boi.

The bank will not assist entities with the filing of the reporting companies. We recommend you contact your CPA or legal counsel if you have questions or issues with the reporting requirements.

Below is a checking list of Beneficial Ownership Information that will be needed to complete the filing process:

Reporting Company

Full legal name
“Doing Business As” DBA if different from legal name
Address of the principal place of business
State of incorporation

Beneficial Owners (owns 25% or more, senior officer, or board member)

Full Legal Name
Date of Birth
Street address of principle residence
Identifying number, issuing jurisdiction, and image of one of the following documents:
1. State driver’s license
2. S. passport
3. State of local government ID

Company Applicant (if a business was formed after January 1, 2024)

Full legal name
Date of Birth
Street Address of principal residence
Identifying number, issuing jurisdiction, and image of one of the following documents:
1. State driver’s license
2. S. Passport
3. State or local government ID