The goal for this blog is to help members of LLCs understand what the new reporting requirements will be when the Corporate Transparency Act (CTA) comes into effect on January 1, 2024. The new reporting requirements will impact existing LLCs quite differently when compared to LLCs that form after the start of next year, and we will break down those important differences in this post.
The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has created new rules for LLCs regarding beneficial ownership information (BOI) reporting provisions. These new rules will impact every domestic reporting company, which FinCEN defines as any entity that is a corporation, a limited liability company, or is created by the filing of a document with a Secretary of State or similar office under the law of a state or Native American tribe.
Importantly, there are twenty-three exemptions that FinCEN allows for in terms of which companies do not have to file the new BOI report. Stout Law can assist any company or LLC in determining whether or not they are exempt from the new CTA. For now, let’s assume that you are a member of an existing LLC. What information are you required to report to FinCEN under the new guidelines?
First of all, domestic reporting companies that were created prior to January 1, 2024, will be given a year to file a new report with FinCEN. This means that January 1, 2025, is the hard deadline for existing LLCs to file an updated report. Once the CTA goes into effect on January 1, 2024, newly created LLCs will be required to file a report with FinCEN within thirty calendar days of the creation of that LLC. Having said that, here is a brief rundown of the information that is required to be disclosed on the report in relation to the LLC:
Stout Law can, of course, assist LLCs in gathering the necessary information for this report.
In addition to these details about the LLC itself, the report must include personal information about each “beneficial owner” of the LLC. FinCEN defines a “beneficial owner” as being an individual who, directly or indirectly, either exercises “substantial control” over a reporting company or owns or controls at least twenty-five percent of the ownership interests of a reporting company. This obviously begs the question, what does “substantial control” mean? The term “substantial control” has many caveats, but put simply, those who have substantial control in an LLC are defined as anyone who is able to make important decisions on behalf of the entity in question.
Having described who constitutes a beneficial owner, the CTA also requires the report to include information about all of the beneficial owners of the LLC. Here is a brief rundown of what that information about the beneficial owners must consist of:
It is important to note that LLCs that are formed after the CTA takes effect on January 1, 2024, will also be required to fill out the same information for the LLC’s applicants. The FinCEN defines applicants as any individuals who file an application to form an entity under the laws of a U.S. state. This would include any individual who is primarily responsible for directing or controlling the filing of such documents by another person.
Based on the new Corporate Transparency Act, it is clear that members of LLCs cannot sit idly by. Instead, LLCs are required to be active, and to submit a new report to the Department of Treasury’s Financial Crimes Enforcement Network that is detailed and accurate. It will be considered unlawful if an individual or LLC provides a report that is either fraudulent, incomplete, or not up to date in regard to all the relevant and required information. If you are a member of an LLC and you are concerned about the Corporate Transparency Act and the new reporting requirements, please schedule a complementary consultation with Stout Law using the form below this blog post.
Feldman, S. (2022, October 3). FinCEN issues final rule implementing the reporting requirements of the Corporate Transparency Act. Retrieved from Wolters Kluwer: https://www.wolterskluwer.com/en/expert-insights/fincen-issues-final-rule-implementing-the-reporting-requirements-of-the-corporate-transparency-act
Haywood, P. T., & Sprague, C. (2022, October 11). Corporate Transparency Act: New Beneficial Ownership Reporting. Retrieved from ICLE: https://www.icle.org/modules/legalupdates/display.aspx?id=bus1705&q=corporate transparency act
Call us 24/7 at (616) 213-3843 or fill out the form below to receive a free and confidential initial consultation.