Corporate Transparency Act – Beneficial Ownership Information Reporting
This letter serves to alert you of the Corporate Transparency Act (CTA) requirement for Beneficial Ownership Information Reporting (BOI), which will impact most LLCs, corporations, limited partnerships, and other closely held entities. Congress enacted the CTA to create a national database of the beneficial owners of companies in the US. The law took effect January 1, 2024, and is part of an increasing effort to combat money-laundering, terrorism, fraud, tax evasion and other financial crimes. Exempted from this requirement are entities that are already subject to significant reporting requirements, including (but not limited to):
i) Tax exempt entity that is described in section 501(c) of the Internal Revenue Code (“Code”).
ii) An entity that: (i) employs more than 20 employees on a full-time basis in the United States; (ii) filed in the previous year Federal income tax returns in the United States demonstrating more than $5,000,000 in gross receipts or sales; and (iii) has an operating presence at a physical office within the United States
This law will affect most small family businesses, including LLCs and other entities designed solely to hold real estate and conduct no active business activities. Single-Member LLCs, though disregarded for Federal income tax purposes will be required to file reports with FinCEN unless they meet the “inactive entity” threshold. For additional information on the CTA and a full list of exemptions visit https://www.fincen.gov/boi.
The CTA went into effect January 1, 2024. Initial reports for entities in existence before this date are due before January 1, 2025. Initial reports for entities created on or after January 1, 2024 are due within 90 days of the creation of the entity. There is no annual reporting requirement, but any changes in beneficial ownership or control must be reported within 30 days of the change. Currently, there are no extensions available. Failure to comply with the reporting requirements or knowingly providing false or fraudulent information carries criminal and civil penalties of $500 per day (up to $10,000) and imprisonment for up to two years.
If you have any ownership in a closely held entity, such as an LLC, corporation, or limited partnership, or if you have significant control over any such entity (including responsibility as an officer, director, manager, chief financial officer or investment trustee) then you may be subject to these requirements and responsible for filing reports with FinCEN.
ADKF has been advised that preparing this report constitutes the practice of law. Therefore, ADKF will not be preparing or submitting this report on behalf of our clients. This report can be submitted by the owner or agent of the entity, or legal counsel retained by the entity. We will be available to help legal counsel with the gathering of information needed for the report, but cannot be directly engaged to prepare the reports.
ADKF is the largest, locally owned public accounting firm in San Antonio, Texas, with branch offices in Boerne and New Braunfels. We have been serving our community since 1991. We are a full-service CPA firm dedicated to providing a broad range of tax, audit, bookkeeping, tax controversy, and consulting services with superior customer service to help our clients meet their goals and objectives. Please click here to set an appointment with us.
