{"id":5247,"date":"2024-11-12T16:03:41","date_gmt":"2024-11-12T16:03:41","guid":{"rendered":"https:\/\/www.fwhtlaw.com\/blog\/?p=5247"},"modified":"2024-11-13T21:20:29","modified_gmt":"2024-11-13T21:20:29","slug":"the-corporate-transparency-act-and-what-it-means-for-u-s-companies","status":"publish","type":"post","link":"https:\/\/www.fwhtlaw.com\/blog\/2024\/11\/12\/the-corporate-transparency-act-and-what-it-means-for-u-s-companies\/","title":{"rendered":"The Corporate Transparency Act and What it Means for U.S. Companies"},"content":{"rendered":"<p class=\"FWHTAuthor\">By <a href=\"https:\/\/www.fwhtlaw.com\/attorneys\/paul-w-muilenberg\">Paul W. Muilenberg<\/a> and <a href=\"https:\/\/www.fwhtlaw.com\/attorneys\/william-d-schlicht\">William D. Schlicht<\/a><\/p>\n<h6 align=\"justify\">Paul and Will are members of the firm\u2019s Corporate Planning, Mergers &amp; Acquisitions and Real Estate Law Department. Paul can be reached at 612.359.7669 or <a href=\"mailto:PMuilenberg@fwhtlaw.com\">PMuilenberg@fwhtlaw.com<\/a>. Will can be reached at 612.359.7602 or <a href=\"mailto:WSchlicht@fwhtlaw.com\">WSchlicht@fwhtlaw.com<\/a>.<\/h6>\n<p align=\"justify\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 Many business owners and other professionals have heard comments or read articles discussing \u201cCorporate Transparency\u201d requirements, \u201cBeneficial Owner\u201d filings, or \u201cFinCEN\u201d reporting requirements.\u00a0 Businesses are wondering what these terms mean and whether they have to take action.\u00a0 All of these terms generally refer to the same thing, the new requirement for many businesses to file with the federal government, information on owners and decision makers of the company. The U.S. Department of the Treasury\u2019s Financial Crimes Enforcement Network (\u201cFinCEN\u201d) has enacted an ownership information reporting rule pursuant to the Corporate Transparency Act (the \u201cReporting Rule\u201d). The Reporting Rule requires certain entities to file beneficial ownership information (\u201cBOI\u201d) reports to FinCEN. BOI reports contain information about the entity itself as well as information on the entity\u2019s \u201cBeneficial Owners\u201d.<\/p>\n<p align=\"justify\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Note: This information pertains to companies formed before January 1, 2024. If your company was registered in the year 2024, please contact your attorney as there are separate reporting requirements for new companies.<\/p>\n<p><strong><u>When Reports are Due:<\/u><\/strong><\/p>\n<p>Reports for companies created or registered to do business before January 1, 2024 must file their BOI report by January 1, 2025.<\/p>\n<p><strong><u>What Types of Companies are Subject to the Reporting Rule:<\/u><\/strong><\/p>\n<p align=\"justify\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 FinCEN has defined certain companies under the Reporting Rule as \u201creporting companies\u201d. This definition includes corporations, limited liability companies (LLCs) and other entities that were created by filing a document with a secretary of state or similar office under the law of the company\u2019s respective state.<\/p>\n<p><strong><u>What Types of Companies are Exempt from the Reporting Rule:<\/u><\/strong><\/p>\n<p align=\"justify\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 FinCEN exempts certain types of entities from the Reporting Rule. These entities include banks and other financial institutions, insurance companies, tax-exempt entities, <strong>large operating companies, subsidiaries of certain exempt entities (such as subsidiaries of large operating companies)<\/strong>, inactive entities as well as a number of others. There are specific criteria for each type of exempt entity in order to avoid reporting under the Reporting Rule.<\/p>\n<p>To qualify as a large operating company, an entity must meet ALL of the following criteria:<\/p>\n<p style=\"padding-left: 40px;\">1. <u>20 Full Time Employees<\/u>. If an entity employs more than 20 full time employees, it may be a large operating company.<\/p>\n<p style=\"padding-left: 80px;\">a. Full time employee generally means an employee who averages at least 30 hours of service per week with a single employer.<\/p>\n<p style=\"padding-left: 80px;\">b. In order to meet this criterion, the entity must employ more than 20 full time employees in the United States.<\/p>\n<p style=\"padding-left: 40px;\">2. <u>Physical Office<\/u>. The entity must have an operating presence at a physical office within the Unites States.<\/p>\n<p style=\"padding-left: 80px;\">a. This means that an entity regularly conducts business at a physical location within the Unites States that the entity either owns or leases, and is physically distinct from the place of business of any other entity.<\/p>\n<p style=\"padding-left: 40px;\">3. <u>Federal Income Tax<\/u>. The entity must have filed a Federal Income Tax return for the previous year demonstrating over $5,000,000.00 in gross receipts or sales.<\/p>\n<p style=\"padding-left: 80px;\">a. The entity must have reported this amount as gross receipts or sales (net of returns and allowances) on the entity\u2019s IRS Form 1120, IRS Form 1120-S, IRS Form 1065 or other applicable IRS form.<\/p>\n<p style=\"padding-left: 80px;\">b. Note: When an entity\u2019s gross receipts or sales are derived, in part, from sources outside the United States, such amounts attributable to outside sources are excluded when determining if the entity meets the $5,000,000.00 threshold.<\/p>\n<p align=\"justify\">If you believe your company may be exempt from the Reporting Rule as a large operating company or otherwise, please contact us for more information.<\/p>\n<p><strong><u>Who Counts as a Beneficial Owner:<\/u><\/strong><\/p>\n<p align=\"justify\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 FinCEN defines a Beneficial Owner as (i) anyone who, directly or indirectly, exercises substantial control over the company; or (ii) owns\/controls at least 25 percent of the ownership interest in the company. Beneficial Owners generally fall into four categories: senior officers; individuals with the power to appoint or remove senior officers and other high ranking officials; \u201cImportant Decision-Makers\u201d; and individuals with at least 25 percent of the ownership interests in the company.<\/p>\n<p style=\"padding-left: 40px;\" align=\"justify\">1. <u>Senior Officers<\/u>. These positions include the president of the company, the company\u2019s chief financial officer, other C-Suite officers or any officers of a company who perform similar functions, regardless of title.<\/p>\n<p style=\"padding-left: 40px;\" align=\"justify\">2. <u>Power to Appoint or Remove<\/u>. The second criteria for whether an individual has substantial control is whether they have the authority to appoint or remove senior officers or a majority of the board of directors of the company.<\/p>\n<p style=\"padding-left: 40px;\" align=\"justify\">3. <u>Important Decision-Makers<\/u>. FinCEN defines an Important Decision-Maker as anyone who directs, determines or has a substantial influence over important decisions made by the company. These decisions include, but are not limited to, business decisions such as the selection or termination of business ventures or the entry into or termination of significant business contracts. Important Decision-Maker duties include decisions over the company\u2019s finances, such as the sale or transfer of principal business assets, major expenditures or investments or compensation plans for senior officers. These also include ones regarding the company\u2019s structure, reorganization, dissolution or merger. The last consideration for substantial control is a \u201ccatch-all\u201d, noting that any other form of substantial control indicates a Beneficial Owner.<\/p>\n<p style=\"padding-left: 40px;\" align=\"justify\">4. <u>25 Percent Ownership<\/u>. As stated above, a Beneficial Owner is also any individual who owns or controls at least 25 percent of the ownership interests of the company. These ownership interests include equity, stock or voting rights; capital and profit interests; convertible instruments; options and other non-binding privileges to buy or sell ownership interests; and, other instruments, contracts or mechanisms used to establish ownership.<\/p>\n<p align=\"justify\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Finally, FinCEN lists exceptions from the Beneficial Owner definition. Minor children, agents or intermediaries acting on behalf of a Beneficial Owner, employees, future interest holders and creditors do not qualify as Beneficial Owners and thus do not need to be included in a BOI report.<\/p>\n<p><strong><u>What Information Needs to be Reported:<\/u><\/strong><\/p>\n<p align=\"justify\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The requirements of a BOI report include designated information on both the company itself as well as each Beneficial Owner of the company. The required information for the company includes its full legal name, any trade names or \u201cdoing business as\u201d names, the address of the company\u2019s principal place of business, the jurisdiction where the company is registered, and the company\u2019s Tax Identification Number issued by the Internal Revenue Service. Required information for a Beneficial Owner includes their full legal name, date of birth, current residential address and a form of legal identification (e.g. passport or driver\u2019s license).<\/p>\n<p align=\"justify\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Note: There are special reporting rules for companies owned by an exempt entity, Beneficial Owners who are minor children, and for the foreign pooled investment vehicle exemption. If any of these apply to your company, please contact us.<\/p>\n<p><strong><u>How to File a BOI Report:<\/u><\/strong><\/p>\n<p align=\"justify\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Filing is done electronically through a FinCEN secure filing system. Filing instructions and the filing system can be found at <a href=\"https:\/\/boiefiling.fincen.gov\/\">BOI E-FILING (fincen.gov)<\/a>.<\/p>\n<p><strong><u>Changes of Inaccuracies in Reporting Information:<\/u><\/strong><\/p>\n<p align=\"justify\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 If there is any change to the required information regarding a company or its Beneficial Owners in a BOI report that has been filed, FinCEN gives the company 30 days to file an updated BOI report with said changes made. The 30 day timeline runs from the time of the information change. The same 30 day timeline is given if a company discovers an inaccuracy in its report. The 30 day period runs from the date the company became aware of the inaccuracy or should have become aware of it.<\/p>\n<p><strong><u>Legal Help:<\/u><\/strong><\/p>\n<p align=\"justify\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 If you are unsure whether your company is required to file a BOI report, whether your company falls into one of the exempt categories, or if you require additional information on any Reporting Rule requirements, you should consult your legal counsel.<\/p>\n<p><strong><u>Additional Information:<\/u><\/strong><\/p>\n<p align=\"justify\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Additional information about the Reporting Rule can be found at <a href=\"http:\/\/www.fincen.gov\/boi\">www.fincen.gov\/boi<\/a>.<\/p>\n<p style=\"text-align: center;\"><strong><u>Announcements<\/u><\/strong><\/p>\n<p><strong><a href=\"https:\/\/www.fwhtlaw.com\/attorneys\/hugh-d-brown\">Hugh Brown<\/a> <\/strong>was appointed to the <strong>Steering Committee of Division 10<\/strong> of the American Bar Association\u2019s Forum on Construction Law.\u00a0 The mission of Division 10, whose formal name is \u201cInfrastructure, Energy and the Environment,\u201d is to provide education, resources and a forum to discuss infrastructure, energy and environmental aspects of construction projects and related solutions and strategies. For more information click <strong><a href=\"https:\/\/www.2x4x10-abaconstructionforum.com\/\">here.<\/a><\/strong><\/p>\n<p><strong><a href=\"https:\/\/www.fwhtlaw.com\/attorneys\/dean-b-thomson\">Dean Thomson<\/a>\u00a0<\/strong>was selected by Finance and Commerce and Minnesota Lawyer as a <strong>2024 Legal Icon<\/strong> honoree for his contributions to the community and the profession. For more information click<strong> <a href=\"https:\/\/www.fwhtlaw.com\/blog\/2024\/10\/31\/dean-thomson-selected-as-a-2024-minnesota-icon-honoree-by-finance-and-commerce\/\">here.<\/a><\/strong><\/p>\n<p>Congratulations to the seven attorneys from\u00a0<strong>Fabyanske, Westra, Hart &amp; Thomson, P.A.<\/strong>\u00a0who have been named 2024 <strong>\u201cMinnesota Super Lawyers\u201d.<\/strong> The polling, researching, and selecting of \u201cSuper Lawyers\u201d is designed to identify Minnesota lawyers who have attained a high degree of peer recognition and professional achievement. Only five percent of Minnesota attorneys receive this honor. FWHT\u2019s 2024 \u201cMinnesota Super Lawyers\u201d include<strong>\u00a0<a href=\"https:\/\/www.fwhtlaw.com\/attorneys\/mark-r-becker\">Mark Becker<\/a>,\u00a0<a href=\"https:\/\/www.fwhtlaw.com\/attorneys\/matthew-t-collins\">Matt Collins,<\/a>\u00a0<a href=\"https:\/\/www.fwhtlaw.com\/attorneys\/julia-j-douglass\">Julia Douglass<\/a>,\u00a0<a href=\"https:\/\/www.fwhtlaw.com\/attorneys\/gary-c-eidson\">Gary Eidson<\/a>, <a href=\"https:\/\/www.fwhtlaw.com\/attorneys\/kyle-e-hart\">Kyle Hart<\/a>,\u00a0<a href=\"https:\/\/www.fwhtlaw.com\/attorneys\/jesse-r-orman\">Jesse Orman<\/a>, <\/strong>and<strong>\u00a0<a href=\"https:\/\/www.fwhtlaw.com\/attorneys\/dean-b-thomson\">Dean Thomson.<\/a>\u00a0\u00a0<\/strong>Dean Thomson\u00a0was also selected as a Top 100 \u201cSuper Lawyer\u201d. For more information click <strong><u><a href=\"https:\/\/www.fwhtlaw.com\/blog\/2024\/07\/19\/congratulations-to-the-fabyanske-attorneys-named-2024-minnesota-super-lawyers\/\">here.<\/a><\/u><\/strong><\/p>\n<p><a href=\"#_ednref1\" name=\"_edn1\"><\/a><\/p>\n<p><em>This discussion is generalized in nature and should not be considered a substitute for professional advice. \u00a9 2024 FWH&amp;T<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Paul W. Muilenberg and William D. Schlicht Paul and Will are members of the firm\u2019s Corporate Planning, Mergers &amp; Acquisitions and Real Estate Law Department. Paul can be reached at 612.359.7669 or\u2026<\/p>\n","protected":false},"author":8,"featured_media":5245,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8,7,12,44],"tags":[],"class_list":["post-5247","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-announcements","category-briefing-papers","category-news","category-paul-w-muilenberg"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v19.12 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Corporate Transparency Act and What it Means for U.S. Companies - Fabyanske, Westra, Hart &amp; Thomson<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.fwhtlaw.com\/blog\/2024\/11\/12\/the-corporate-transparency-act-and-what-it-means-for-u-s-companies\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Corporate Transparency Act and What it Means for U.S. Companies - Fabyanske, Westra, Hart &amp; Thomson\" \/>\n<meta property=\"og:description\" content=\"By Paul W. 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