Important Reporting Update for all LLC Owners – Corporate Transparency Act Goes into Effect January 1, 2024

One of the main reasons that clients choose to form a limited liability company (LLC) is to protect themselves and their assets from the debts and liabilities that come with owning a business. Forming an LLC means that only the LLC can be held accountable for the debts and liabilities incurred by the business, thereby shielding the owners and managers from personal liability.

However, as of January 1, 2024, the Corporate Transparency Act (CTA) will require that all LLCs submit annual beneficial ownership reports to the Financial Crimes Enforcement Network (FinCEN). While this won’t change the liability protections afforded to owners of LLCs, it will require that such owners provide information that has not historically been required when forming an LLC.

Beneficial Ownership Reports

Under the CTA, every entity that meets the definition of a “reporting company” will be required to file a beneficial ownership information (BOI) report. LLCs fall under the CTA’s definition of a reporting company. Therefore, unless an exemption applies, every LLC in the country will have to file a BOI report.

Certain corporate entities, such as statutory trusts, business trusts, or foundations, may also be deemed reporting companies, but only if the entity was created by the filing of a document with a secretary of state or similar office in a U.S. jurisdiction that requires such a filing.

Beneficial Ownership

A “beneficial owner” is defined as any individual who, either directly or indirectly, (1) exercises substantial control over a reporting company or (2) owns or controls at least 25% of the reporting company’s ownership interests.

There are four ways in which an individual can exercise substantial control over a reporting company. An individual exercises substantial control if:

1. The individual is a senior officer (the company’s president, CFO, CEO, COO, general counsel, or any other officer who performs a similar function).
2. The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company.
3. The individual is an important decision-maker for the reporting company.
4. The individual has any other form of substantial control over the reporting company.

Required Information

A reporting company will have to report information about the company itself and its beneficial owner. An LLC will have to report the following business information:

• Its legal name;
• Any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names;
• Current street address of its principal place of business if that address is in the United States, or, for companies whose principal place of business is outside the United States, the current address from which the company conducts business in the United States;
• The jurisdiction of formation or registration; and
• Taxpayer Identification Number (or, if a foreign company, a tax identification number issued by a foreign jurisdiction and the name of the jurisdiction).
• A reporting company will also have to indicate whether it is filing an initial report, or a correction or an update of a prior report.

An LLC will also have to report the following information for each beneficial owner:

• The individual’s name;
• Date of birth;
• Residential address; and
• An identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of identification document. An image of the identification document will also need to be uploaded.

Exemptions

There are 23 exemptions to the BOI reporting requirement. Examples of exempt entities include banks, governmental authorities, insurance companies, accounting firms, tax-exempt entities, and public utilities.

In general, the exemptions usually will not apply to LLCs. The exemptions are geared toward entities that are already subject to government regulation, such as credit unions and securities brokers, which file reports with other governmental agencies.

However, there is an exception for large LLCs, meaning those that employ more than 20 full-time employees in the United States, have an operating presence at a physical office in the United States, and filed a federal income tax or information return for the previous year showing more than $5 million in gross receipts or sales.

Reporting Deadlines

If your LLC was created or registered prior to January 1, 2024, you will have until January 1, 2025, to file your BOI report.

If your LLC was created or registered on or after January 1, 2024, and before January 1, 2025, you must file a BOI report within 90 calendar days after receiving notice that your LLC’s creation or registration is effective, whichever is earlier.

If you form an LLC on or after January 1, 2025, you must file a BOI report within 30 calendar days after receiving notice that its creation or registration is effective.

How to Report

Reporting companies must file their beneficial ownership information electronically through FinCEN’s website at www.fincen.gov/boi. There is no filing fee for the BIO report. Once the filing is submitted to FinCEN, the system will provide the filer with a confirmation of receipt.

Emily K. Montagna, Esq. specializes in the Corporate Transactional Law practice at Genova Burns LLC and regularly assists companies with forming LLCs, filing annual reports, and preparing operating agreements. Ms. Montagna can be reached via email here, or call 973.230.2080.