New mandatory reporting requirements for business and practice owners

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The Corporate Transparency Act or CTA creates mandatory reporting requirements for the owners of millions of American LLCs and corporate entities. We cover the basics every doctor should know.

New MANDATORY reporting requirements for the owners of most LLCs and corporate entities

Starting January 1, 2024, many companies in the United States will have to report beneficial owner information (BOI), on individuals who ultimately own or control the company to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. I have taken the following info from FinCEN itself, which has produced detailed outlines for business owners. This is not specific legal advice, which you should seek on this issue, failure to comply can result in penalties of $500 per day.

How will I report my company’s BOI?

Those required to report your company’s BOI to FinCEN, you will do so electronically through a secure filing system available via FinCEN’s website. This system is currently being developed and will be available before your report must be filed.

When will FinCEN accept BOI reports?

FinCEN will begin accepting BOI reports on January 1, 2024 and reports will not be accepted before then. The form to report BOI is not yet available. Once available, information about the form will be posted on FinCEN’s BOI webpage.

How long do I have to report my company’s BOI to FinCEN?

Companies created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial BOI report.

Companies created or registered on or after January 1, 2024, will have 30 days to file its initial BOI report. This 30-day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.

What companies will be required to report BOI to FinCEN?

Companies required to report are called reporting companies. There are two types of reporting companies:

• Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
• Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.

Who is a beneficial owner of a reporting company?

A beneficial owner is someone who either directly or indirectly: (1) exercises substantial control over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests.

FinCEN’s Small Entity Compliance Guide provides checklists and examples that may assist in identifying beneficial owners (see Chapter 2.3 “What steps can I take to identify my company’s beneficial owners?”).

What is “substantial control”?

Substantial control over a reporting company occurs in in four different ways. If the individual falls into any one of the categories below, they exercise substantial control:

• The individual is a senior officer (the company’s president, chief financial officer, general counsel, chief executive office, chief operating officer, or any other officer who performs a similar function).
• The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company.
• The individual is an important decision-maker for the reporting company. See Question D.3 for more information.
• The individual has any other form of substantial control over the reporting company as explained further in FinCEN’s Small Entity Compliance Guide (see Chapter 2.1, “What is substantial control?”).

Who qualifies for an exception from the beneficial owner definition?

There are five instances in which an individual who would otherwise be a beneficial owner of a reporting company qualifies for an exception. In those cases, the reporting company does not have to report that individual as a beneficial owner to FinCEN.

Are any companies exempt from reporting?

There are 23 types of entities that are exempt from the reporting requirements. FinCEN’s Small Entity Compliance Guide includes tables and checklists for each of the 23 exemptions that may help determine whether a company meets an exemption (see Chapter 1.2, “Is my company exempt from the reporting requirements?”). Companies, owners and advisors should carefully review the qualifying criteria before concluding that they are exempt.

Attorney Ike Devji has 20 years of legal experience focused exclusively on asset protection, risk management and wealth preservation. He helps protect a national client base with more than $6 billion in personal assets, including several thousand physicians. He is a contributing author to multiple books for physicians, a Physicians Practice contributor for over a decade and a frequent national CME presenter. Learn more at www.ProAssetProtection.com.