Beneficial ownership disclosure in the US

Beneficial ownership disclosure in the United States has undergone significant changes in recent years, primarily due to the enactment of the Corporate Transparency Act (CTA) as part of the Anti-Money Laundering Act of 2020. Here are the key aspects of beneficial ownership disclosure in the USA:

Corporate Transparency Act (CTA)

1. Purpose: The CTA aims to combat increasing transparency regarding the true owners of companies operating in the United States.

2. Reporting Requirements: Under the CTA, certain businesses must report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), part of the U.S. Department of the Treasury.

3. Definition of Beneficial Owner: A beneficial owner is defined as an individual who, directly or indirectly:

• Exercises substantial control over the entity.
• Owns or controls at least 25% of the entity's ownership interests.

4. Information to be Reported: The required information includes:

• Full legal name
• Date of birth
• Current residential or business address
• Unique identifying number from an acceptable identification document (e.g., passport or driver's license)

5. Entities Required to Report: Generally, most corporations, limited liability companies (LLCs), and similar entities formed or registered to do business in the U.S. are subject to the reporting requirements. However, there are exemptions for certain entities, including:

• Large operating companies (with over 20 full-time employees and over $5 million in revenue)
• Certain regulated entities (e.g., banks, credit unions)
• Ta-exempt entities
• Accounting firms
• Publicly traded companies
• Subsidiaries of exempt entities
• Beneficial owner exemptions:

• Minor children
• Nominee, intermediary, custodian, or agent on behalf of another
• Employees (not senior officers)
• Creditors
• Individuals with interest only through the right of inheritance (future interest)?

6. Compliance Timeline:

• A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial beneficial ownership information report.
• A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report.
• Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports with FinCEN.?

7. Penalties for Non-Compliance: Failure to comply with the reporting requirements can result in civil and, in some cases, criminal penalties.

New entities formed after the effective date must report their beneficial ownership information at the time of formation. While there is no annual reporting requirement, reporting companies must file an updated report to inform change about their beneficial owners. More information can be found at https://www.fincen.gov/.

Please contact a US tax professional at Fernandez Young, LLP, to discuss how this act may impact your business.

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