UPDATE:  A preliminary injunction has been filed in Texas to halt the deadline of this program.  The US Attorney General has appealed and now the 5th Circuit Court will decide how to proceed.  If you believe that your practice would need to comply with the rulemaking and has not yet filed the reports, then it is best to consult legal counsel.

As we approach the end of the year, we wanted to share general information about the Corporate Transparency Act (CTA), which has been affecting our clients, in case the act applies to you and you have not yet taken action. The CTA imposes new reporting requirements on many entities, including small businesses and medical practices. If you own or control an entity, the reporting requirements may apply to you. As a reminder, Altfest Personal Wealth Management does not provide legal advice.

The CTA, which was enacted in 2021 and went into effect this year, is an attempt to address crimes such as money laundering, terrorism, and tax evasion. Under the new rules, “reporting companies” must submit “beneficial ownership information” reports to the Financial Crimes Enforcement Network (FinCEN), a Treasury Department bureau.

FinCEN may consider an entity a reporting company if it is a corporation, a limited liability company (LLC), or if it was otherwise created by filing a document with a secretary of state or similar office. There are exemptions for 23 types of entities, including publicly traded companies, large operating companies, and nonprofits.

FinCEN considers an individual a “beneficial owner” if he or she owns at least 25% of a reporting company or exercises substantial control over a reporting company. FinCEN considers senior officers and important decision-makers to be among those who have substantial control.

A reporting company must generally report its legal name, any trade names, its address, its jurisdiction, and its taxpayer identification number. A reporting company must also generally report the name, date of birth, residential address, and information from an acceptable identification document (e.g., a passport or driver’s license) for each beneficial owner.

The deadline for existing entities is approaching. Reporting companies that were created before this year must report beneficial ownership information by January 1, 2025. Reporting companies that were created in 2024 must report within 90 days of creation. Reporting companies that are created after 2024 must report within 30 days of creation. Updates or corrections must be submitted within 30 days. Those that do not comply with reporting requirements may be subject to civil and criminal penalties.

The following resources may be helpful:

• FinCEN’s beneficial ownership information website is https://www.fincen.gov/boi.
• FinCEN’s Small Entity Compliance Guide, which includes the list of exemptions and other information, can be accessed at https://www.fincen.gov/boi/small-entity-compliance-guide.
• FinCEN has answered Frequently Asked Questions at https://www.fincen.gov/boi-faqs.

We have one additional consideration to keep in mind. It may be administratively simpler for beneficial owners to first obtain a “FinCEN identifier,” a unique number issued by FinCEN. Individuals will still need to provide information to obtain the FinCEN identifier. Thereafter, an individual will only need to provide his or her FinCEN identifier to any associated reporting companies for beneficial ownership information reports. This may streamline initial reporting for beneficial owners involved with multiple reporting companies. Additionally, since individuals can update information directly with FinCEN, it may reduce the ongoing burden on reporting companies to provide updates (e.g., a beneficial owner’s address change). Individuals may obtain FinCEN identifiers at https://fincenid.fincen.gov.

Though individuals may be able to complete the beneficial ownership information report filing on their own, we strongly encourage you to speak with your attorney and/or accountant for information before filing. If you need specific legal advice (e.g., to determine if an exemption applies or to determine whether an individual has substantial control), we suggest you consult with an attorney.

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Investment advisory services provided by Altfest Personal Wealth Management (“APWM”). All written content on this site is for information purposes only. Opinions expressed herein are solely those of APWM, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.