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Reporting required for Corporate Transparency Act entities

Tiffany Lashmet, in her recent Texas Agriculture Law Blog, discusses the new federal reporting requirement and the penalties that may be imposed for noncompliance.

Tiffany Dowell Lashmet

January 24, 2024

4 Min Read
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Corporate Transparency Act: A new federal reporting requirement for most small business entities will impact a number of farms, ranches, and agricultural businesses that have organized as a business entity, such as an LLC, corporation, or limited partnership. dusanpetkovic

A new federal reporting requirement for most small business entities will impact a number of farms, ranches, and agricultural businesses that have organized as a business entity, such as an LLC, corporation, or limited partnership. 

Why?

The Corporate Transparency Act is a law enacted to prevent money laundering, corrupt financial transactions, and financial terrorism. As part of that effort, the Act requires the United States Department of Treasury’s Federal Crimes Enforcement Network (FinCEN) to maintain a national database of beneficial owners of entities that are not otherwise subject to disclosure requirements. The purpose of the CTA is to “better enable critical national  security, intelligence, and law enforcement efforts to counter money laundering, the financing of  terrorism, and other illicit activity” by creating a national registry of beneficial ownership  information for “reporting companies.” In order to develop and maintain this database, FinCEN will require entities to file a Beneficial Ownership Information Report (BOIR) online.

Who?

The reporting requirements apply to most small entities. This includes LLCs, corporations, and any entities created by filing a document with the Secretary of State or other similar agency. This does include single member LLCs. For many states, that will include limited partnerships, limited liability partnerships, and limited liability limited partnerships. Depending on state rules, this may also include certain business trusts.  General partnerships and sole proprietorships are not required to report, as these entities have no filing requirement.

There is a long list of entities that are exempt from reporting, including publicly traded companies, certain tax-exempt entities, certain banks, certain insurance companies, and others. To read more on the exemptions, click here. Notably, most farm and ranch entities will likely not fall under the listed exceptions.

What?

There are essentially three categories of information that must be provided: entity information; beneficial owner information; and company applicant information.

Entity information

Each entity must report the following information:

  • Full legal company name

  • Trade names or DBAs

  • Complete address including street address of principal place of business

  • State, Tribal Nation, or foreign jurisdiction of creation

  • Company identification number (Taxpayer Identification or Employee Identification Number)

Beneficial owner information

Each entity must also report the following information for each beneficial owner. A “beneficial owner” is a person who, directly or indirectly, exercises substantial control over the company or who, directly or indirectly, owns 25% or more of the ownership interest in the company. An individual with substantial control is one who directs, determines, or exercises substantial influence over important decisions of a reporting company and includes senior officers, general counsel, individuals with authority to appoint or remove senior officers or a majority of the board of directors, individuals who directs or determines or has substantial influence over important decisions of the business. Beneficial owners are required to provide the following information:

  • Full legal name

  • Date of birth

  • Residential address

  • Identification number and image of either US Passport or Driver’s License

Company applicants

For all companies created after January 1, 2024, the “company applicants” must also be reported.  Company applicants include the individual who directly files the document that created or registers the reporting company and the individual primarily responsible for directing or controlling the filing of the relevant document.  This is particularly important for attorneys to flag as, oftentimes, company applicants may be the entity’s attorney.

Company applicants must provide the following information:

  • Full legal name

  • Date of birth

  • Residential address

  • Identification number and image of either US Passport or Driver’s License

When?

Entities registered before January 1, 2024, have one year to file their first BOIR, with the deadline being January 1, 2025.  Entities created in 2024 must file their BOIR within 90 days of receiving notice from the Secretary of State that their entity was created or registered. Entities created after January 1, 2025, will have 30 days to file initial reports.

Once the initial report is filed, a company is required to file a new report within 30 days, any time the reported information changes. This could include changes in company ownership, business location, owner address, expiration of owner or applicant’s driver's license, etc.

Where and how?

FinCEN created an online portal for entities to file their BOIR.

Failure to comply?

The Corporate Transparency Act includes penalties for both entities and individuals for willful violations of the reporting requirements.  Penalties may be imposed for willfully filing false information and for willfully failing to report. Penalties may include civil fines of up to $500/day for each day the violation continues and criminal penalties of up to $10,000 and possible imprisonment for up to 2 years.

What should I do now?

If you have or are a part owner in any type of business entity, you should determine whether reporting is required for the entity.  If so, you should ensure the required BOIR is filed in a timely manner.

If you are an attorney who creates entities as part of your practice, you should ensure you have a plan for filing the required BOIRs going forward and determine what steps you may want to take to notify prior clients of these reporting requirements.

Additional Information

About the Author(s)

Tiffany Dowell Lashmet

Assistant Professor and Extension Specialist in Agricultural Law, Texas A&M AgriLife Extension

Tiffany Dowell Lashmet is Assistant Professor and Extension Specialist in Agricultural Law, Texas A&M Department of Agricultural Economics.

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