What Is the Corporate Transparency Act of 2024?

As of January 1, 2024, a new reporting requirement affecting millions of small businesses went into effect. Under the Corporate Transparency Act (CTA), small businesses, including limited liability companies (LLC), are required to file a Beneficial Ownership Information (BOI) Report with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). Non-compliance can result in serious penalties.

Forming an LLC protects a business owner’s assets against the business’s debts and liabilities, making the LLC accountable and shielding individuals from personal liability. The CTA was enacted to prevent “bad actors” from concealing business ownership of corporations, LLCs, and similar entities to prevent money laundering, tax fraud, terrorism funding, and other illegal acts. Under the new requirement, all LLCs must now submit annual beneficial ownership information (BOI) reports to the FinCEN – information not previously required when forming an LLC.

What Is Beneficial Ownership?

Beneficial owners are individuals with substantial direct or indirect control over a company or who own or control at least 25 percent ownership interest. An individual exercises substantial control through the following:

• Serve as a senior officer, such as president, chief financial officer, chief executive officer, chief operating officer, or similar function
• Has authority to appoint or remove a majority of directors or certain officers
• Is an important decision-maker
• Any other form of substantial control

What Information Must Be Reported?

Domestic companies created before January 1, 2024, must provide information about the company and its beneficial owners. Companies created on or after January 1, 2024, must provide information about the company, its beneficial owners, and its company applicants. Required filing information includes:

• Legal business name
• Trade or “doing business as” names
• Current business address of the principal place of business or where it conducts business outside the United States
• Jurisdiction of formation
• Taxpayer identification number
• Whether the report is the initial, updated, or corrected

Information required for each beneficial owner includes:

• Legal name
• Date of birth
• Residential address
• Identification of government identification number and issuing jurisdiction

The following dates must file reports:

• Domestic companies created before January 1, 2024, must file by January 1, 2025
• Domestic companies created on or after January 1, 2024 and before January 1, 2025 must file within 90 days of the date on which the actual or public notice was received
• Domestic companies created on or after January 1, 2025, must file within 30 days of the date on which actual or public notice was received

Companies must report any change in the submitted information regarding the company or its beneficial owners within 30 calendar days of the change, including who the beneficial owners are and if the company becomes eligible for an exemption. Beneficial ownership information reports can be filed electronically, free of charge, at www.fincen.gov/boi. The system will generate a confirmation receipt upon completion.

Are There Any Exemptions to the Reporting Requirement?

Exemptions generally will not apply to LLCs but largely to government-regulated entities, such as securities brokers or credit unions, that are required to file with other governmental agencies. In total, there are 23 exemptions to the reporting requirement, which include but are not limited to:

• Accounting firms
• Banks
• Government authorities
• Insurance companies
• Public utilities
• Tax-exempt entities

Certain large LLCs employing 20 full-time employees in the United States and have a physical operating office or filed the previous year’s federal income tax returns showing more than $5 million in gross receipts or sales may be exempt.

Our South Jersey Business Lawyers at Sidney L. Gold & Associates, P.C. Help Clients With LLCs

If you have questions regarding your LLC, the Corporate Transparency Act, or the new reporting requirements, our experienced South Jersey business lawyers at Sidney L. Gold & Associates, P.C. can help. Call us today at 215-569-1999 or contact us online for a free consultation. Located in Philadelphia and Pennsauken, New Jersey, we serve clients in South Jersey, including Cherry Hill, Haddonfield, Marlton, Moorestown, and Mount Laurel.