The information in this column is not intended as legal advice but to provide a general understanding of the law. Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstances.
As of January 1, 2024, a new law known as the Corporate Transparency Act (CTA) requires that certain owners of registered entities provide personal information to a new database created by the US Treasury Department’s Financial Crimes Enforcement Network (called “FinCEN” for short). With limited exceptions, this requirement applies to all registered entities, like Limited Liability Companies (LLC), Limited Partnerships (LP), and corporations, across all states. The database is intended to help FinCEN monitor and investigate criminal activity. The database will not be accessible to the general public.
Lawyers across the country are sending notice to their clients that they, along with millions of other business owners in the country, are now required to submit Beneficial Ownership Information (BOI) to FinCEN’s new database.
Beneficial Ownership Information (BOI) for the entity will include the entity’s name, address, and tax identification number. BOI for each owner in the entity will include the owner’s name, current residential address, date of birth, either driver’s license or passport number, and a copy of the current driver’s license or passport with a clear picture of the person. The disclosure requirements for owners only apply to individuals who exercise substantial control over the entity, or who own at least 25% of the entity. After submitting this BOI in an initial report, the entity will need to update the report anytime provided information changes (like an address).
The deadline to submit BOI to FinCEN depends on when the entity was formed. Entities formed after January 1, 2024, must submit complete information within 90 days of the formation date. Entities formed before January 1, 2024, must submit complete information by January 1, 2025.
Failure to comply with the CTA can result in civil penalties of up to $10,000.00 and/or up to 2 years imprisonment.
This law represents a dramatic change for business owners. You will likely have questions. The best source for information is FinCEN’s frequently asked questions page www.fincen.gov/boi-faqs and FinCEN’s Small Business Compliance Guide www.fincen.gov/boi/small-entity-compliance-guide. FinCEN is still making adjustments to its requirements, so its official FA page is the best place to get the most current guidance.
As a policy, most law firms will not upload BOI on behalf of clients. FinCEN has designed an online portal to submit information quickly and conveniently, see www.boiefiling.fincen.gov. The portal is designed well enough for non-attorneys to submit their information without difficulty.
If you do not wish to submit the BOI reports yourself, my recommendation is to use a corporate service or registered agent service company. PLEASE BE AWARE THAT THERE ARE MANY COMPANIES OFFERING TO SUBMIT BOI REPORTS AND SOME OF THEM ARE FRAUDULENT SCHEMES TO STEAL YOUR PERSONAL INFORMATION. Therefore, it is recommended that you use only companies with an established record of providing corporate services.
As with any legal matter, if you have questions regarding the Corporate Transparency Act, you should consult an attorney familiar with business entity law.
Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas. (936)295-6394
