On December 23, 2024, the United States Court of Appeals for the Fifth Circuit lifted a nationwide preliminary injunction halting enforcement of the Corporate Transparency Act (CTA) and the requirement for beneficial ownership information reporting. As a result, the CTA BOI reporting requirements and deadlines are once again in effect, though FinCEN has extended the deadline for all existing entities to file their initial reports to January 13th 2025.
Below is a compilation of the most frequently asked questions we received during recent webinars.
CT Corporation is not a law firm and cannot provide legal advice, including providing advice as to whether any specific entity will be required to file a report. CT Corporation cannot provide its own interpretation of the statute or FinCEN’s final report ruling, however many of the questions can be answered by referring to the text of the final rule, sections of which have been provided where appropriate. You can also direct questions to FinCEN. The phone number of the FinCEN Regulatory Support Section is 1-800-767-2825 and you can email them at [email protected].
The information below was updated on February 13, 2024.
Related resources
Beneficial Ownership Information filing solution
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Will your platform have a client questionnaire for client to fill-out and return to the attorney?The plan is to have role based permissions as part of the Platform Pro tier.
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If a CT Corporation Employee is the Company Applicant (CA), and we list them on our Report, how can we ensure the CA will update their information effectively until the day they die?For formations handled by CT Corporation, we will provide the company applicant information as part of the evidence for their formation. This is an additional service included as a part of completing your formation filing with CT Corporation.
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When we submit a certificate of formation to CT Corporation to file, does the person sending it in required to identify themselves?We will need the order placer information in order to process the order. For formations handled by CT Corporation, we will provide the company applicant information as part of the evidence for their formation. This is an additional service included as a part of completing your formation filing with CT Corporation.
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Would this platform be used in conjunction with hCue/and or the entities already in hCue?Yes, it can be however there is currently is no automated integration between the solutions. That will be available in the future.
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Is the platform also meant for attorneys that have to file for their multiple clients? Will they need a separate subscription for each client?Yes, the platform is meant for law firms of any size and particularly useful for attorneys with multiple clients. For example, the attorneys can make entity groups by client. The attorney will not need separate subscriptions.
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What is the cost of this platform?Please contact us for options and pricing.
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Can this platform be used by entities that CT Corporation is not the registered agent?Yes, this platform can be used by entities with any registered agent.
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Can this system push the reporting information directly to BOSS?FinCEN has not made their system available for submissions or system testing. We are in daily and regular communication with FinCEN and monitoring their alerts. As soon as we have more information to share we will.
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Does CT Corporation populate the multiple entity document from its records?CT Corporation does not pre-populate reports for clients.
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Will CT Corporation and/or FinCen allow for a duplicate report filing?Users can easily duplicate and edit reports to quickly reuse data across multiple reports.
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Does the information in CT Corporation's Beneficial Ownership Platform then get submitted directly to FinCEN?CT Corporation's Beneficial Ownership Platform will be connected directly to FinCEN once FinCEN provides access for submissions and system testing. We are in regular communication with FinCEN and monitoring their alerts. We will share more information when it is available.
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If we upload another spreadsheet with the same entity on the sheet, would your system duplicate it or would it know that the entity report is already on the dashboard?
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If we upload another spreadsheet with the same entity on the sheet, would your system duplicate it or would it know that the entity report is already on the dashboard?Currently, users can have duplicate entities within the system. Since it is not report data that gets entered, the user has the flexibility to upload data and prepare it as they need.
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Will CT Corporation offer a managed service that will allow clients to submit to CT Corporation spreadsheets of relevant entities & data, and then CT will go off and make the filings in BOSS for the client?Currently, CT Corporation does not offer a managed service.
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Will the spreadsheet to upload for multiple entities be generated from CTAdvantage?The spreadsheet is within the Beneficial Ownership Secure Filer and Platform.
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Is this platform intended to be used by law firms or can we send clients directly to CT Corporation so that they can handle submissions themselves?Both options are available. Law firms can do it for their clients and clients can have their own subscriptions with CT Corporation.
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Under the CT Corporation subscription would CT be working with the reporting company directly? Or, is it merely a platform that is being used directly by the company applicant?Please contact us for options and pricing.
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How is all of this being done when it's my understanding that FinCEN hasn't released forms for filings? Is CT Corporation just accumulating the information it expects to be needed based on what is currently known.CT Corporation has been building the Platform based on the Corporate Transparency Act and FinCEN's rules. FinCEN has been communicating the information it is requiring for submissions. We are in daily and regular communication with FinCEN and monitoring their alerts. As soon as we have more information to share we will.
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Do we have to have used CT Corporation to file the formations/incorporations of these entities in order to use this B.O. Dashboard?The customer does not need to file the formations with CT Corporation to use the platform.
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Does CT Corporation expect advisors/ representatives like law firms to subscribe for the CT platform or reporting companies?Law firms can subscribe to the platform.
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Will CT Corporation's BOI platform be included in existing CT Corporation subscriptions?The platform can be added to your existing CT Corporation subscriptions. Please contact your salesperson for additional details.
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If the client edits the exported information, can you bulk update the information?Information within the platform can be bulk edited.
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How is personal identifiable information kept safe?CT Corporation safeguards sensitive personal information (PII) using our robust security protocols.
Beneficial owners
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How do the rules apply to series LLCs? How do we report for main LLC and any additional series?All LLCs have to file a BOI report unless exempt. There is no specific exemption for series LLCs. However a series LLC may qualify for one of the 23 exemptions. Whether an entity qualifies for an exemption must be determined on a case by case basis. Whether a series has to file a report has not been addressed by FinCEN and therefor is up to the LLC or series to determine.
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What about Limited Partnerships - does information about limited partners owning more than 25% need to be reported?If a determination is made that the limited partnership is a reporting company, it will have to report information about all of its beneficial owners. Individuals who own or control at least 25 percent of the ownership interests in the reporting company are beneficial owners. The limited partnership can be a reporting company if it was created by the filing of a document with a secretary of state or similar office under the laws of a state or Indian Tribe or formed under the law of a foreign country and registered to do business in any state or Tribal jurisdiction by the filing of a document with a secretary of state or similar office.
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What if a person can't get mail at their physical address? Is a PO box acceptable?The address of a beneficial owner and of a company applicant (other than a company applicant acting in the course of his or her employment) that must be reported must be a residential street address. Related Resource: Beneficial Ownership Information reporting – What information is required?
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On a multi-person board where no individual director has the right to make these decisions, but the board as a whole does, will each director need to be a beneficial owner?Here is what FinCEN has to say about that in their FAQs:Is a member of a reporting company’s board of directors always a beneficial owner of the reporting company?No. A beneficial owner of a company is any individual who, directly or indirectly, exercises substantial control over a reporting company, or who owns or controls at least 25 percent of the ownership interests of a reporting company.
Whether a particular director meets any of these criteria is a question that the reporting company must consider on a director-by-director basis.
Related resource: Beneficial Ownership Information reporting – What information is required?
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What if an LLC is member-managed and the members are only trusts? Do the trusts have to report as beneficial owners? (They have no photo ID)...A beneficial owner is defined as follows: (d) Beneficial owner. For purposes of this section, the term “beneficial owner,” with respect to a reporting company, means any individual who, directly or indirectly, either exercises substantial control over such reporting company or owns or controls at least 25 percent of the ownership interests of such reporting company.
A beneficial owner must be an individual. And the individual’s substantial control or 25 % ownership may be direct or indirect. In addition, the FinCEN small business compliance guide states the following: “Note for trusts: The following individuals may hold ownership interests in a reporting company through a trust or similar arrangement:
- A trustee or other individual with the authority to dispose of trust assets.
- A beneficiary who is the sole permissible recipient of trust income and principal or who has the right to demand a distribution of or withdraw substantially all of the trust assets.
- A grantor or settlor who has the right to revoke or otherwise withdraw trust assets.”
Related resource: Beneficial Ownership Information reporting – What information is required?
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What if the company is owned by a company? Is it the individual with substantial control over the company or that of the parent company? Is there a distinction between the beneficial owner of the company and ultimate beneficial owner when reporting?The term “beneficial owner,” means any individual who, directly or indirectly, either exercises substantial control over the reporting company or owns or controls at least 25 percent of the ownership interests of the reporting company. Note that substantial control can be direct or indirect, as can the ownership or control of ownership interests. Indirect control includes, for example, controlling one or more intermediary entities that separately or collectively exercise substantial control over a reporting company. Examples of indirect ways to own or control ownership interests in a reporting company include owning or controlling one or more intermediary entities, or the ownership interests of any intermediary entities, that separately or collectively own or control ownership interests of a reporting company.
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What if our entity's beneficial owner is not an individual but another company?Every entity has at least one individual beneficial owner. The term “beneficial owner,” means any individual who, directly or indirectly, either exercises substantial control over the reporting company or owns or controls at least 25 percent of the ownership interests of the reporting company. Every entity has an individual or individuals who will meet the definition of exercising substantial control. Note also that substantial control can be direct or indirect, as can the ownership or control of ownership interests. Indirect control includes, for example, controlling one or more intermediary entities that separately or collectively exercise substantial control over a reporting company. Examples of indirect ways to own or control ownership interests in a reporting company include owning or controlling one or more intermediary entities, or the ownership interests of any intermediary entities, that separately or collectively own or control ownership interests of a reporting company.
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Are corporate directors always beneficial owners?Here is what FinCEN has to say about that in their FAQs:Q. Is a member of a reporting company’s board of directors always a beneficial owner of the reporting company?A. No. A beneficial owner of a company is any individual who, directly or indirectly, exercises substantial control over a reporting company, or who owns or controls at least 25 percent of the ownership interests of a reporting company. Whether a particular director meets any of these criteria is a question that the reporting company must consider on a director-by-director basis.
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Does FINCen expect companies to report ALL senior officers as "beneficial owners"?A reporting company must report every beneficial owner. A beneficial owner is any individual who, directly or indirectly, either exercises substantial control over a reporting company or owns or controls at least 25 percent of the ownership interests of the reporting company. An individual exercises substantial control over a reporting company if the individual serves as a senior officer of the reporting company, which includes any individual holding the position or exercising the authority of a president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer, regardless of official title, who performs a similar function. Accordingly, a reporting company must report every individual who meets the definition of senior officer.
Related resource: Beneficial Ownership Information reporting – What information is required?
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When a trust owns an entity, do the owners of the trust need to be disclosed as beneficial owners?FinCEN’s Small Business Compliance Guide states the following concerning trusts:Note for trusts: a trustee of a trust or similar arrangement may exercise substantial control over a reporting company.Note for trusts: The following individuals may hold ownership interests in a reporting company through a trust or similar arrangement:
- A trustee or other individual with the authority to dispose of trust assets.
- A beneficiary who is the sole permissible recipient of trust income and principal or who has the right to demand a distribution of or withdraw substantially all of the trust assets.
- A grantor or settlor who has the right to revoke or otherwise withdraw trust assets.
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Could an entity have more than 1 beneficial owner? And is it required to list each?
There is no maximum number of beneficial owners that a reporting company must report. Every beneficial owner must be included in a reporting company's BOI report.
Related resource: Beneficial Ownership Information reporting – What information is required?
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To confirm, an individual minority member of a Board of Directors would not be deemed to have substantial control?Here is what FinCEN has to say about that in their FAQs:Q. Is a member of a reporting company’s board of directors always a beneficial owner of the reporting company?A. No. A beneficial owner of a company is any individual who, directly or indirectly, exercises substantial control over a reporting company, or who owns or controls at least 25 percent of the ownership interests of a reporting company. Whether a particular director meets any of these criteria is a question that the reporting company must consider on a director-by-director basis. Related resource: Beneficial Ownership Information reporting – What information is required?
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Trustee's of a minor child's trust would be included as a Beneficial Owner?It depends upon whether the trustee directly or indirectly exercises substantial control over the reporting company and/or owns or controls more than 25 percent of its ownership interests.FinCEN’s Small Business Compliance Guide states the following concerning trusts:Note for trusts: a trustee of a trust or similar arrangement may exercise substantial control over a reporting company.Note for trusts: The following individuals may hold ownership interests in a reporting company through a trust or similar arrangement:
- A trustee or other individual with the authority to dispose of trust assets.
- A beneficiary who is the sole permissible recipient of trust income and principal or who has the right to demand a distribution of or withdraw substantially all of the trust assets.
- A grantor or settlor who has the right to revoke or otherwise withdraw trust assets.
Related resource: Beneficial Ownership Information reporting – What information is required?
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If ownership (stock) is held in a trust, are the beneficiaries of the trust considered the beneficial owners? Or would it be the trustees?Any individual who directly or indirectly exercises substantial control over a reporting company and/or owns or controls more than 25 percent of its ownership interest is a beneficial owner. Regarding trusts, the final rule states the following:(ii) Ownership or control of ownership interest. An individual may directly or indirectly own or control an ownership interest of a reporting company through any contract, arrangement, understanding, relationship, or otherwise, including:(C) With regard to a trust or similar arrangement that holds such ownership interest:(1) As a trustee of the trust or other individual (if any) with the authority to dispose of trust assets;(2) As a beneficiary who:(i) Is the sole permissible recipient of income and principal from the trust; or(ii) Has the right to demand a distribution of or withdraw substantially all of the assets from the trust; or(3) As a grantor or settlor who has the right to revoke the trust or otherwise withdraw the assets of the trust
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Is a beneficiary of a trust which owns 25% or more a beneficial owner?Any individual who directly or indirectly exercises substantial control over a reporting company and/or owns or controls more than 25 percent of its ownership interest is a beneficial owner. Regarding trusts, the final rule states the following:(ii) Ownership or control of ownership interest. An individual may directly or indirectly own or control an ownership interest of a reporting company through any contract, arrangement, understanding, relationship, or otherwise, including:(C) With regard to a trust or similar arrangement that holds such ownership interest:(1) As a trustee of the trust or other individual (if any) with the authority to dispose of trust assets;(2) As a beneficiary who:(i) Is the sole permissible recipient of income and principal from the trust; or(ii) Has the right to demand a distribution of or withdraw substantially all of the assets from the trust; or(3) As a grantor or settlor who has the right to revoke the trust or otherwise withdraw the assets of the trust
Related resource: Beneficial Ownership Information reporting – What information is required?
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Would be interested in understanding: (1) whether EINs are required for disregarded entities (i.e., no tax ID) and (2) how beneficial ownership is assessed for trusts.(1) The final rule requires a reporting company to provide its Taxpayer Identification Number, not necessarily its EIN. The IRS defines Taxpayer Identification Numbers as to include the following:
- Social Security number "SSN"
- Employer Identification Number "EIN"
- Individual Taxpayer Identification Number "ITIN"
- Taxpayer Identification Number for Pending U.S. Adoptions "ATIN"
- Preparer Taxpayer Identification Number "PTIN
(2)FinCEN’s Small Business Compliance Guide states the following concerning trusts:- A trustee of a trust or similar arrangement may exercise substantial control over a reporting company.
The following individuals may hold ownership interests in a reporting company through a trust or similar arrangement:- A trustee or other individual with the authority to dispose of trust assets.
- A beneficiary who is the sole permissible recipient of trust income and principal or who has the right to demand a distribution of or withdraw substantially all of the trust assets.
- A grantor or settlor who has the right to revoke or otherwise withdraw trust assets.
Related resource: Beneficial Ownership Information reporting – What information is required?
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How far down does the beneficial ownership look? If there is no direct owner of 25%, but a trust owns 75% with 3 equal beneficiaries, would that count?Every individual who meets the definition of a beneficial owner (e.g., direct or indirect substantial control or direct or indirect owner of 25 percent or more of ownership interests) must be reported. There is no maximum number of beneficial owners. FinCEN expects every reporting company to have at least one beneficial owner because there always be an individual who is an important decision maker or otherwise exercises substantial control over the reporting company regardless of whether it is owned by entities and those entities are owned by other entities, etc. In addition, both substantial control and 25% ownership may be indirect. An example FinCEN provides of an indirect way to own or control ownership interests in a reporting company is “owning or controlling one or more intermediary entities, or the ownership interests of any intermediary entities, that separately or collectively own or control ownership interests of a reporting company.”Regarding trusts, FinCEN’s Small Business Compliance Guide states the following:
- A trustee of a trust or similar arrangement may exercise substantial control over a reporting company.
The following individuals may hold ownership interests in a reporting company through a trust or similar arrangement:- A trustee or other individual with the authority to dispose of trust assets.
- A beneficiary who is the sole permissible recipient of trust income and principal or who has the right to demand a distribution of or withdraw substantially all of the trust assets.
- A grantor or settlor who has the right to revoke or otherwise withdraw trust assets.
Related resource: Beneficial Ownership Information reporting – What information is required?
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If I, as an attorney, direct my client to the SOS website with instructions on how to create the entity, am I and "individual who directs the creation of the entity?"FinCEN has an FAQ that states the following: Is my accountant or lawyer considered a company applicant?
An accountant or lawyer could be a company applicant, depending on their role in filing the document that creates or registers a reporting company. In many cases, company applicants may work for a business formation service or law firm.
An accountant or lawyer may be a company applicant if they directly filed the document that created or registered the reporting company. If more than one person is involved in the filing of the creation or registration document, an accountant or lawyer may be a company applicant if they are primarily responsible for directing or controlling the filing.
For example, an attorney at a law firm that offers business formation services may be primarily responsible for overseeing preparation and filing of a reporting company’s incorporation documents. A paralegal at the law firm may directly file the incorporation documents at the attorney’s request. Under those circumstances, the attorney and the paralegal are both company applicants for the reporting company.Related resource: Beneficial Ownership Information reporting – What information is required?
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If an LLC is owned by a trust, and the trustee is corporate trustee, what information needs to be provided related to the beneficial owner/substantial control?For each beneficial owner of the LLC you must report their legal name, date of birth, home address, unique number from an acceptable document and issuing jurisdiction of the document, and an image of the document. The beneficial owners are all individual who, directly or indirectly exercised substantial control of the LLC or directly or indirectly owned more than 25% of its ownership interests. You will have to determine who the beneficial owners are based on your specific situation.
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An LLC with 5 equal members - 20% each - would NOT need to file its owners. Correct?Unless it is exempt, the LLC will have to report all of its beneficial owners. The term “beneficial owner,” with respect to a reporting company, means any individual who, directly or indirectly, either exercises substantial control over such reporting company or owns or controls at least 25 percent of the ownership interests of such reporting company. An individual who owns 20% of an LLC may still be considered a beneficial owner if the individual exercises substantial control. The definitions of both “substantial control” and “ownership interests” are very broad and should be reviewed before determining who is a beneficial owner of the LLC.
Company applicant
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A company applicant can only be an individual, correct?That is correct. A company applicant must be an individual.
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Will you need to provide your social security number or passport information to Fincen for the company applicant? What if the paralegal is involved in the filing process?
A company applicant must report the following information:
(A) The full legal name of the individual;
(B) The date of birth of the individual;
(C) A complete current address consisting of:(1) In the case of a company applicant who forms or registers an entity in the course of such company applicant's business, the street address of such business; or
(2) In any other case, the individual's residential street address;(D) A unique identifying number and the issuing jurisdiction from one of the following documents:
(1) A non-expired passport issued to the individual by the United States government;
(2) A non-expired identification document issued to the individual by a State, local government, or Indian tribe for the purpose of identifying the individual;
(3) A non-expired driver's license issued to the individual by a State; or
(4) A non-expired passport issued by a foreign government to the individual, if the individual does not possess any of the documents described in paragraph (b)(1)(ii)(D)( 1), (b)(1)(ii)(D)( 2), or (b)(1)(ii)(D)( 3) of this section; and(E) An image of the document from which the unique identifying number in paragraph (b)(1)(ii)(D) of this section was obtained.
Related resource: What every small business needs to know about the Corporate Transparency Act and Beneficial Ownership Information Reporting
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Can you provide clarification on what a company applicant is?
FinCEN has provided guidance in its Small Business Compliance Guide. It describes the company applicant as follows:
There are two categories of company applicants – the “direct filer” and the individual who “directs or controls the filing action.” The first category (direct filer) must be identified by all reporting companies that have a company applicant reporting requirement. The second category (directs or controls the filing action) may not be applicable to all reporting companies that have a company applicant reporting requirement. No reporting company will have more than two company applicants.
Company Applicant Category 1: Direct filer - This is the individual who directly filed the document that created a domestic reporting company, or the individual who directly filed the document that first registered a foreign reporting company. This individual would have actually physically or electronically filed the document with the secretary of state or similar office.
Company Applicant Category 2: Directs or controls the filing action - The other possible company applicant is the individual who was primarily responsible for directing or controlling the filing of the creation or first registration document. This individual is a company applicant even though the individual did not actually file the document with the secretary of state or similar office.
The following examples illustrate how to identify company applicants in common company creation or registration scenarios.
Example 1: Individual A is creating a new company. Individual A prepares the necessary documents to create the company and files them with the relevant State or Tribal office, either in person or using a self-service online portal. No one else is involved in preparing, directing, or making the filing. Individual A is a company applicant because Individual A directly filed the document that created the company. Because Individual A is the only person involved in the filing, Individual A is the only company applicant.
Example 2: Individual A is creating a company. Individual A prepares the necessary documents to create the company and directs Individual B to file the documents with the relevant State or Tribal office. Individual B then directly files the documents that create the company. Individuals A and B are both company applicants – Individual B directly filed the documents, and Individual A was primarily responsible for directing or controlling the filing. Individual B could, for example, be Individual A’s spouse, business partner, attorney, or accountant; in all cases, Individuals A and B are both company applicants in this scenario.Related resource: What every small business needs to know about the Corporate Transparency Act and Beneficial Ownership Information Reporting
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If we use CT to form companies for us, who will the Company Applicant be for CT Corp? Will it be a different person every time?
Your company applicant will the individual who directly files the document that creates your company and the individual who is primarily responsible for directing or controlling the filing if more than one individual is involved in the filing of the document.
Related resource: What every small business needs to know about the Corporate Transparency Act and Beneficial Ownership Information Reporting
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An attorney directs a paralegal to prepare Articles and signs as Incorporator. Paralegal sends doc to CT Corp for filing. Who are the TWO company applicants?
Your company applicant will the individual who directly files the document that creates your company and the individual who is primarily responsible for directing or controlling the filing if more than one individual is involved in the filing of the document.
Related resource: What every small business needs to know about the Corporate Transparency Act and Beneficial Ownership Information Reporting
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The individual who is the actual filer at the state office is a company applicant?, or the signatory on the Certificate of Formation/Incorporation?
According to FinCEN “State filing office employees who process formation documents in the ordinary course of their state employment are not the filers of the documents they process, and therefore do not need to be reported.” The company applicant is the individual who directly files the document that creates or registers the company and if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing.
Related resource: What every small business needs to know about the Corporate Transparency Act and Beneficial Ownership Information Reporting
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Would the service of CT Corp to file a document make CT Corp a Company Applicant?
The company applicant is the individual who directly files the document that creates or registers the company and if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing. Each reporting company will have to determine who meets the definition of company applicant based on their specific situation.
Related resource: What every small business needs to know about the Corporate Transparency Act and Beneficial Ownership Information Reporting
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So does that mean that for all entities post 1/1/24 where an attorney or accountant forms a business, there will always be two company applicants?
There will be two company applicants if, in addition to the individual who directly files the document, there is an individual who is primarily responsible for directing or controlling the filing. Each reporting company will have to determine who meets the definition of company applicant based on their specific situation.
Related resource: What every small business needs to know about the Corporate Transparency Act and Beneficial Ownership Information Reporting
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So if a law firm drafts articles of organization for a new llc after 1/1/24, but sends to the client to review/file, is the law firm a "company applicant"?
The company applicant is the individual who directly files the document that creates the company and if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing. Each reporting company will have to determine who meets the definition of company applicant based on their specific situation.
Related resource: What every small business needs to know about the Corporate Transparency Act and Beneficial Ownership Information Reporting
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In the scenario of a law firm (attorney and paralegal) working with a third party service provider, who must report as applicant?
The company applicant is the individual who directly files the document that creates the company and if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing. Each reporting company will have to determine who meets the definition of company applicant based on their specific situation.
Related resource: What every small business needs to know about the Corporate Transparency Act and Beneficial Ownership Information Reporting
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Can you confirm that a company applicant is a person. For example, if a law firm files the articles of organization for a new LLC, the company is the attorney/paralegal doing the filing - correct? In other words, the law firm is not the company applicant, but the attorney is the company applicant.
I can confirm that the company applicant must be an individual. The final rule defines an applicant as the individual who directly files the document that creates the company and if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing.
Related resource: What every small business needs to know about the Corporate Transparency Act and Beneficial Ownership Information Reporting
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Can a company applicant be a firm, or is it only individual people?
The company applicant must be an individual. The final rule defines an applicant as the individual who directly files the document that creates the company and if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing.
Related resource: What every small business needs to know about the Corporate Transparency Act and Beneficial Ownership Information Reporting
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To clarify, if an attorney or paralegal submits the requisite information to FINCEN on behalf of its clients, that paralegal/attorney would be deemed an "applicant?"
The company applicant is the individual who directly files the document that creates the company and if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing. Each reporting company will have to determine who meets the definition of company applicant based on their specific situation.
Related resource: What every small business needs to know about the Corporate Transparency Act and Beneficial Ownership Information Reporting
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So, if I am an attorney helping my client form a new corporation after 1/1/24, do I have to submit my own reporting, or does the owner of the corporation provide that information?
The reporting company must report the information for its company applicant or applicants in its initial BOI report - unless the company applicant has obtained a FinCEN identifier, in which case the individual company applicant would directly provide that information to FinCEN in the FinCEN Identifier application.
Related resource: What every small business needs to know about the Corporate Transparency Act and Beneficial Ownership Information Reporting
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Assume that a law firm uses a filing service for filing formation documents with the Secretary of State. Would the filing service be a company applicant? Or would you list the lawyer(s) and/or paralegal who instructs the service to file the document?
A company applicant must be an individual. The company applicant is the individual who directly files the document that creates the company and if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing. Each reporting company will have to determine who meets the definition of company applicant based on their specific situation.
Related resource: What every small business needs to know about the Corporate Transparency Act and Beneficial Ownership Information Reporting
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If a law firm prepares or files an amendment to an LLC's articles of organization, is the law firm a company applicant?
The company applicant is the individual who directly files the document that creates the company and if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing of the document that creates the entity.
Related resource: What every small business needs to know about the Corporate Transparency Act and Beneficial Ownership Information Reporting
Data privacy
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Is this data going to be public or will only stay with FINCEN?The public will not have access to the BOI database. The CTA authorizes FinCEN to disclose BOI under specific circumstances to five general categories of recipients: (1) U.S. Federal, state, local, and Tribal government agencies requesting BOI for specified purposes; (2) foreign law enforcement agencies, judges, prosecutors, central authorities, and competent authorities; (3) financial institutions using BOI to facilitate compliance with customer due diligence requirements under applicable law; (4) Federal functional regulators and other appropriate regulatory agencies acting in a supervisory capacity assessing financial institutions for compliance with CDD requirements; and (5) the U.S. Department of the Treasury.
Expert Insights
File your BOI report
Complete a Beneficial Ownership as well as updates every time company or owner information changes.
Beneficial Ownership Filing Options
Employee definitions and identification
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Is there any guidance if you use a PEO. IRS only recognizes one employer.
For the purposes of the large operating company exemption, an entity must employ more than 20 full time employees in the United States, with “full time employee in the United States” having the meaning provided in 26 CFR 54.4980H-1(a) and 54.4980H-3, except that the term “United States” as used in 26 CFR 54.4980H-1(a) and 54.4980H-3 has the meaning provided in § 1010.100(hhh);
In general, a full-time employee is, with respect to a calendar month, an employee who is employed an average of at least 30 hours of service per week with an employer.
26 CFR 54.4980H-1(a) states that “The term employee means an individual who is an employee under the common-law standard. See §31.3401(c)–1(b). For purposes of this paragraph (a)(15), a leased employee (as defined in section 414(n)(2)), a sole proprietor, a partner in a partnership, a 2-percent S corporation shareholder, or a worker described in section 3508 is not an employee.
FinCEN has not provided guidance on the impact of the use of a PEO on the number of employees.
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For the 20 employee count - do the subs of a large operating company also have to have 20 employeesEmployee headcounts are done at the level of each individual LLC, corporation, or other entity. If an entity has more than 20 employees and meets the other requirements of the large operating company exemption it does not matter how many employees its subsidiaries have.
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Is the "full time employee" definition limited to US employees?For the purposes of the large operating company exemption, an entity must employ more than 20 full time employees in the United States.
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What if a group of companies uses one entity as a payroll entity that actually hires all employees for the companies? Will all entities be disqualified because they do not have 20 headcount?Employee headcount, for the purpose of the large operating company exemption, is done at the level of each individual LLC, corporation, or other entity. FinCEN declined to permit companies to consolidate employee headcount across affiliated entities. So each entity in the group will have to have more than 20 employees to be eligible for the large operating company exemption.
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For the 20 employees per entity is there any consideration for a Payroll Master that pays all employees in an affiliated group but filed under the one Payroll Master. Otherwise, the requirement is failed
FinCEN has not provided guidance regarding the use of payroll entities. You will have to determine if your situation meets the more than 20 employee requirement. The rule states that for the purposes of the large operating company exemption, an entity must employ more than 20 full time employees in the United States, with “full time employee in the United States” having the meaning provided in 26 CFR 54.4980H-1(a) and 54.4980H-3, except that the term “United States” as used in 26 CFR 54.4980H-1(a) and 54.4980H-3 has the meaning provided in § 1010.100(hhh);
In general, a full-time employee is, with respect to a calendar month, an employee who is employed an average of at least 30 hours of service per week with an employer.
26 CFR 54.4980H-1(a) states that “The term employee means an individual who is an employee under the common-law standard. See §31.3401(c)–1(b). For purposes of this paragraph (a)(15), a leased employee (as defined in section 414(n)(2)), a sole proprietor, a partner in a partnership, a 2-percent S corporation shareholder, or a worker described in section 3508 is not an employee.
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In a holding company structure where the parent files the consolidated tax return but has no employees, and each of the subsidiaries meets the 20 employee threshhold, is the exception avaialble to the subsidiaries?If an entity does not have more than 20 employees it cannot qualify for the large operating company exemption. Employee headcounts are done at the level of each individual LLC, corporation, or other entity. FinCEN declined to permit companies to consolidate employee headcount across affiliated entities. Thus, for example, parent companies cannot count employees of their subsidiaries, or vice versa.
Exemptions
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If you don't need to report, do you have to fill out a form explaining why? or you just do nothing?An exempt entity does not have to file anything to claim its exemption. It just doesn’t file an initial BOI report. However, if a company filed its BOI report and thereafter qualifies for an exemption it must file an updated BOI report indicating that it is now exempt.
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What is considered an inactive entity for these purposes?Any entity that: (A) was in existence on or before January 1, 2020, (B) is not engaged in active business, (C) is not owned by a foreign person, whether directly or indirectly, wholly or partially, (D) has not experienced any change in ownership in the preceding twelve month period, (E) has not sent or received any funds in an amount greater than $1,000, either directly or through any financial account in which the entity or any affiliate of the entity had an interest, in the preceding 12 month period, and (F) does not otherwise hold any kind or type of assets, whether in the United States or abroad, including any ownership interest in any corporation, limited liability company, or other similar entity.
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Are entities filed with DIF's exempt?
Exemptions relevant to financial institutions include the following:
- Any bank, as defined in: (A) Sec. 3 of the Federal Deposit Insurance Act, (B) Sec. 2(a) of the Investment Company Act of 1940, or (C) Sec. 202(a) of the Investment Advisers Act of 1940;
- Any Federal credit union or State credit union, as those terms are defined in Sec. 101 of the Federal Credit Union Act; Depository institution holding company;
- Any bank holding company as defined in Sec. 2 of the Bank Holding Company Act of 1956, or any savings and loan holding company as defined in Sec. 10(a) of the Home Owners' Loan Act.
However, whether any entity qualifies for an exemption must be decided on a case by case basis.
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If an entity has filed its articles of dissolution, would that eliminate any ownership interest consideration for purposes of qualifying for the inactive entity exemption?The inactive entity exemption applies to the following: Any entity that: (A) was in existence on or before January 1, 2020, (B) is not engaged in active business, (C) is not owned by a foreign person, whether directly or indirectly, wholly or partially, (D) has not experienced any change in ownership in the preceding twelve month period, (E) has not sent or received any funds in an amount greater than $1,000, either directly or through any financial account in which the entity or any affiliate of the entity had an interest, in the preceding 12 month period, and (F) does not otherwise hold any kind or type of assets, whether in the United States or abroad, including any ownership interest in any corporation, limited liability company, or other similar entity.
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Does the $5 Million gross apply to affiliated entities?For an entity that is part of an affiliated group of corporations within the meaning of 26 USC 1504 that filed a consolidated return, the applicable amount (in determining whether the $5 million threshold is met) is the amount reported on the consolidated return for the group.
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Banks are exempt, but are bank holding companies?There is an exemption for any bank holding company as defined in Sec. 2 of the Bank Holding Company Act of 1956, or any savings and loan holding company as defined in Sec. 10(a) of the Home Owners' Loan Act.
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For those of us that work from home from a residence in the US, do our home offices qualify under the following test for the exceptions: "and has an operating presence at a physical office within the United States"?The term “has an operating presence at a physical office within the United States” means that an entity regularly conducts its business at a physical location in the United States that the entity owns or leases and that is physically distinct from the place of business of any other unaffiliated entity. Whether an office meets that definition will depend on the situation – e.g., did the parent regularly conduct business at the location, did it own or lease the location, etc. (Although the final reporting rule itself is silent on the issue, it may be noted that FinCEN indicated in the Preamble to the final reporting rule that entities can qualify for this exemption if their physical presence in the United States consists exclusively of properties used as someone's residence.)
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Are single member llc exempted?Every LLC, single or multiple member, has to file a BOI report unless it qualifies for one of the 23 exemptions. There is no exemption for single member LLCs among the 23 exemptions.
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Are ESOPs exempt?If the ESOP is a corporation, LLC, or other entity created by filing a document with a secretary of state or similar office, and it does not qualify for one of the 23 exemptions, it would have to file a BOI report. There is no exemption for ESOPS among the 23 exemptions.
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Regarding 23 Exemptions: What about a Bank who acts in the capacity of fiduciary trustee?A bank is exempt if it meets the definition of a bank as defined in:
- Section 3 of the Federal Deposit Insurance Act
- Section 2(a) of the Investment Company Act of 1940 or
- Section 202(a) of the Investment Advisers Act of 1940
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Third Party Administrator of an Insurance Company?If the third party administrator is a corporation, LLC, or other entity created by filing a document with a secretary of state or similar office, and it does not qualify for one of the 23 exemptions, it would have to file a BOI report. There is no exemption for third party administrators among the 23 exemptions.
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Does exemption #21 apply if it's a corporation wholly owned by a foreign entity?The large operating company applies to any entity that:
- Employs more than 20 full time employees in the United States, with “full time employee in the United States” having the meaning provided in 26 CFR 54.4980H-1(a) and 54.4980H-3, except that the term “United States” as used in 26 CFR 54.4980H-1(a) and 54.4980H-3 has the meaning provided in § 1010.100(hhh);
- Has an operating presence at a physical office within the United States; and
- Filed a Federal income tax or information return in the United States for the previous year demonstrating more than $5,000,000 in gross receipts or sales, as reported as gross receipts or sales (net of returns and allowances) on the entity's IRS Form 1120, consolidated IRS Form 1120, IRS Form 1120-S, IRS Form 1065, or other applicable IRS form, excluding gross receipts or sales from sources outside the United States, as determined under Federal income tax principles. For an entity that is part of an affiliated group of corporations within the meaning of 26 U.S.C. 1504 that filed a consolidated return, the applicable amount shall be the amount reported on the consolidated return for such group.
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Where can I find those qualifiers for exempt companies?See our Expert Insight article - The 23 exemptions from the Corporate Transparency Act’s beneficial ownership information reporting requirement
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Are Relying Advisors exempt based on their affiliate's status as a Registered Investment Advisor?There are several exemptions that may apply to entities involved in the private investment fund industry. These include the exemptions for investment companies or investment advisers, for venture capital fund advisers, and for pooled investment vehicles. You should review all 23 exemptions to determine if the specific Relying Advisor qualifies for any of these exemptions.
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Do the exemptions in your slide apply to foreign country corporations?The final rule states that an entity that qualifies for one of the exemptions is not a reporting company. It does not limit it to US entities.
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Would you please confirm that entities with 19 or less full time employees will be exempt from FinCEN Reporting?If the entity is a corporation, LLC, or other entity created by filing a document with a secretary of state or similar office it must file a BOI report unless it qualifies for an exemption. There is no exemption for entities with 19 or less full time employees. Furthermore, an entity that does not have more than 20 employees cannot qualify for the large operating company exemption. You should review all 23 exemptions to see if your entity qualifies for any of them.
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Does the creditor exemption mean that finance comapnies are exempt from reporting? Or do you mean the company's creditors do not need to be listed as a beneficial ownwer?The creditor exception deals with who is a beneficial owner. A creditor of a reporting company is not considered a beneficial owner. The term creditor for the purposes of this exception means an individual who would meet the definition of a beneficial owner of the reporting company solely through rights or interests for the payment of a predetermined sum of money, such as a debt incurred by the reporting company, or a loan covenant or other similar right associated with such right to receive payment that is intended to secure the right to receive payment or enhance the likelihood of repayment.
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For new companies, what if the 20 employees or 5 million is going to be close?An entity must meet all three criteria to qualify for the large operating company exemption. If an entity does not have more than 20 employees or did not file a federal tax return for the previous year demonstrating more than $5 million in gross receipts or sales it cannot qualify for the exemption.
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Are subsidiaries, indirect and direct, of exempt entities also exempt from reporting?There is an exemption for any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by one or more exempt entities other than entities that are exempt because they are a money services business, pooled investment vehicle, entity assisting a tax exempt entity, or an inactive entity.
Foreign Companies
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Does filing a tax form for a foreign entity to obtain an EIN mean that is falls under the definition of a foreign reporting company?No. A foreign entity can be a foreign reporting company only if it registers to do business in the United States by filing a document (for example, an application for a certificate of authority) with a secretary of state or similar office. Filing a tax form or obtaining an EIN does not register a foreign entity to do business in a US state or jurisdiction.
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What is the reporting requirement if your parent company is owned by a Canadian public company (not registered in the US). How do we provide ownership for that?Your beneficial owners are the individuals who, directly or indirectly, either exercise substantial control over your reporting company or who own or control at least 25 percent of its ownership interests. Note that indirect ways to own or control ownership interests in a reporting company include owning or controlling one or more intermediary entities, or the ownership interests of any intermediary entities, that separately or collectively own or control ownership interests of a reporting company.
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1. Can a foreign (Canadian) securities reporting issuer (publicly traded corporation) be declared as the beneficial owner of an American entity? If so, are its subsidiaries exempted from the beneficial ownership information reporting requirement?
2. Is a foreign (Canadian) securities reporting issuer (publicly traded corporation) exempted from the beneficial ownership information reporting requirement?1. Beneficial owners must be individuals.
2. There are 23 exemptions. You should review all 23. One the exemptions is for a securities reporting issuer. This is defined as followed: (i) Securities reporting issuer. Any issuer of securities that is:
Timing
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If an entity formed before 1.1.2024 terminates during 2024, will they need to file?We are waiting for guidance from FinCEN on the issue of whether a BOI report would have to be filed.
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When and where will the FinCEN BOI form be available?As of the date of this webinar FinCEN has not released the final version of the BOI form to the public.
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When will the FinCEN identifier application be available?FinCEN has indicated that applications for FinCEN identifiers may not be filed before January 1, 2024.
Physical location
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Question on the operating presence test for large operating company: Would the physical location of a wholly-owned subsidiary satisfy this?The term “has an operating presence at a physical office within the United States” means that an entity regularly conducts its business at a physical location in the United States that the entity owns or leases and that is physically distinct from the place of business of any other unaffiliated entity. Whether an office meets that definition will depend on the situation – e.g., did the parent regularly conduct business at the location, did it own or lease the location, etc.
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What about entities with no physical location?FinCEN has not provided guidance on the consequences of having a remote, online or virtual office. You will have to determine if your "office" situation meets the definition of the term “has an operating presence at a physical office within the United States”. This term means that an entity regularly conducts its business at a physical location in the United States that the entity owns or leases and that is physically distinct from the place of business of any other unaffiliated entity.
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What is the requirement if, let's say, a foreign entity sets up a US sub and has no US physical presence and uses the address of its law/accounting firm?A reporting company must provide the reporting company’s current address and not the address of a third party. FinCEN stated in the preamble to final rule that “the requirement to report the street address of a business is not satisfied by reporting a P.O. box or the address of a company formation agent or other third party.” Beyond that, FinCEN has not provided guidance on how a reporting company without a physical presence can report the current address of its principal of place of business. Until further guidance is provided you will have to determine how to meet the requirement of reporting the current address of its principal place of business.
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Subsidiary
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My company files a consolidated tax return in the name of our holding company. The holding company would be considered exempt as it has less than 50 employees, etc. However, its subsidiaries would meet the Transparency Act requirements. Would the subsidiaries be exempt though if we file a consolidated return?Assuming the holding company qualifies for an exemption, the subsidiary could qualify for the subsidiary exemption, which applies to any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by an exempt entity (other than a money services business, pooled investment vehicle, entity assisting a tax exempt entity, or an inactive entity). Otherwise, the subsidiary would have to qualify for an exemption in its own right.
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Do subsidiaries of SEC entities have to comply with CTA?If the “SEC entity” is exempt, its subsidiary could qualify for the subsidiary exemption, which applies to any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by an exempt entity (other than a money services business, pooled investment vehicle, entity assisting a tax exempt entity, or an inactive entity). Otherwise, the subsidiary would have to qualify for an exemption in its own right.
Large operating company
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The large operating company exemption requires having an operating presence at a physical office within the United States. Does United States mean United States, the District of Columbia, the Indian lands (as that term is defined in the Indian Gaming Regulatory Act), Puerto Rico and other Territories and Insular Possessions of the United States?The final rule does not define “United States”. It does define “State” as any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, the United States Virgin Islands, and any other commonwealth, territory, or possession of the United States. In addition, although not directly on point, the large operating company exemption states that “United States” for the purposes of the requirement to have more than 20 full time employees in the United States, has the meaning provided in § 1010.100(hhh). That section defines United States as “The States of the United States, the District of Columbia, the Indian lands (as that term is defined in the Indian Gaming Regulatory Act), and the Territories and Insular Possessions of the United States.”
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
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What constitutes a "Large Operating Company"Answer 24 - Large operating company. Any entity that:
- Employs more than 20 full time employees in the United States, with “full time employee in the United States” having the meaning provided in 26 CFR 54.4980H-1(a) and 54.4980H-3, except that the term “United States” as used in 26 CFR 54.4980H-1(a) and 54.4980H-3 has the meaning provided in § 1010.100(hhh);
- Has an operating presence at a physical office within the United States; and
- Filed a Federal income tax or information return in the United States for the previous year demonstrating more than $5,000,000 in gross receipts or sales, as reported as gross receipts or sales (net of returns and allowances) on the entity's IRS Form 1120, consolidated IRS Form 1120, IRS Form 1120-S, IRS Form 1065, or other applicable IRS form, excluding gross receipts or sales from sources outside the United States, as determined under Federal income tax principles. For an entity that is part of an affiliated group of corporations within the meaning of 26 U.S.C. 1504 that filed a consolidated return, the applicable amount shall be the amount reported on the consolidated return for such group.
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Is the large operating company factors need all THREE factors listed here to apply, or is just one of the three?You must have all three factors to qualify for the large operating company exemption.
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
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How does the exclusion of gross receipts or sales from sources outside the US practically work with regards to the large operating company exemption? The non-US revenue would be included in the filed federal income tax return, so how can it be excluded?For tax related questions we recommend consulting with an accountant or tax lawyer.
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
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Regarding large operating company exemption: Does this mean that essentially every new entity will need to file with FinCEN since no new company will be reporting proof of $5m in gross sales with the IRS within the first 30 days of existence?A newly created entity will not qualify for the large operating company exemption because of the requirement to have filed a tax return for the previous year demonstrating $5 million in gross receipts or sales. However, whether a new entity will have to file a BOI report depends upon whether the entity meets the definition of a domestic reporting company (e.g., an LLC, corporation, or other entity created by filing a document with a secretary of state or similar office) and whether it qualifies for any other exemption.
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
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For the Large Operating Company Exemption, does the company have to meet all three of the criteria?Yes, a company must meet all three criteria to qualify for the large operating company exemption.
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
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Could you speak to how single member LLCs are treated if owned by a large operating corporation?The treatment of any specific entity will depend upon a number of factors. However, you may note that a wholly owned subsidiary of a large operating company could qualify for the exemption provided to any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by one or more of 18 categories of exempt entities, including large operating companies.
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
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Are subsidiaries of large operating companies exempt from reporting?Any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by an entity that is exempt under the large operating company exemption would also be exempt under the subsidiary exemption.
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
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For those of us that work from home from a residence in the US, do our dedicated home offices qualify under the following test for the exceptions: "and has an operating presence at a physical office within the United States"?The term “has an operating presence at a physical office within the United States” means that an entity regularly conducts its business at a physical location in the United States that the entity owns or leases and that is physically distinct from the place of business of any other unaffiliated entity. Whether an office meets that definition will depend on the situation. Regarding the home office, although the final reporting rule itself is silent on the issue, it may be noted that FinCEN indicated in the Preamble to the final reporting rule that entities can qualify for this exemption if their physical presence in the United States consists exclusively of properties used as someone's residence.
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
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To be a large operating company, for how many years do you have to meet those requirements? 2023 only?An entity must continually qualify for the large operating company exemption. If at any time the entity ceases to qualify it will be required to file a BOI report unless it qualifies for another exemption.
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
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All our employees work remotely so we have a serviced office at Regus as our headquarters. Do we qualify as large entity?FinCEN has not provided guidance on the consequences of having a remote, online or virtual office. You will have to determine if your "office" situation meets the definition of the term “has an operating presence at a physical office within the United States”, which means that an entity regularly conducts its business at a physical location in the United States that the entity owns or leases and that is physically distinct from the place of business of any other unaffiliated entity.
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
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Would a wholly owner subsidiary of a Large Operating Company need to file?Any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by a large operating company qualifies for the exemption for subsidiaries of certain exempt entities.
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
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Re: large companies: did you say that if two affiliated entities have a combined gross receipts above the $5 million limits, then does that mean both entities have reached the limit?The rule provides that in determining if an entity has met the requirement to have filed a Federal income tax or information return in the United States for the previous year demonstrating more than $5,000,000 in gross receipts or sales, for an entity that is part of an affiliated group of corporations within the meaning of 26 U.S.C. 1504 that filed a consolidated return, the applicable amount shall be the amount reported on the consolidated return for such group.
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
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Is there any guidance on the meaning of "receipts"? Would intra-company payments count for receipts? E.g., a managing LLC receiving management fees from subsidiariesFor the purposes of the large operating company exemption, the more than $5 million in gross receipts or sales is the figure reported as gross receipts or sales (net of returns and allowances) on the entity's IRS Form 1120, consolidated IRS Form 1120, IRS Form 1120-S, IRS Form 1065, or other applicable IRS form, excluding gross receipts or sales from sources outside the United States, as determined under Federal income tax principles.
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If we have a large operating company that satisfies the requirements and it is owned by a holding company that does not have any employees, is the holding company exempt?If an entity does not have more than 20 employees it cannot qualify for the large operating company exemption. Employee headcounts are done at the level of each individual LLC, corporation, or other entity. FinCEN declined to permit companies to consolidate employee headcount across affiliated entities. Thus, for example, parent companies cannot count employees of their subsidiaries, or vice versa. There is an exemption for subsidiaries of exempt entities, not for the parents of exempt entities.
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
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If a company qualifies as a large operating company, but it has wholly owned (or majority owned) subsidiaries that would not qualify on their own, am I correct that the subsidiaries need to register – but does that mean just disclosing the parent company or the beneficial ownership of the otherwise exempt parent?
The answer differs depending upon whether the subsidiary is wholly owned or majority owned. Any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by a large operating company qualifies for the exemption for subsidiaries of certain exempt entities.
If the entity is not wholly owned by the large operating company and the entity is a reporting company, there is a special rule for the reporting of information about any beneficial owner whose ownership interests in a reporting company are held through one or more entities, all of which are themselves exempt from the reporting company definition. If this special rule applies, then you may report the names of all of the exempt entities instead of information about the individual who is a beneficial owner of your company through ownership interests in those exempt entities. FinCEN provides the following example: A large operating company owns 50% of the ownership interests in your company. Large operating companies are exempt from the reporting company definition. Individual A owns 50% of the large operating company, and therefore owns 25% of the ownership interests in your company (50% × 50% = 25%). You may report the name of the large operating company instead of Individual A’s personal information.
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
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In an example where a parent organization has 4 subsidiaries (A,B,C,D) with subsidiary A having more than 20 FTE, Subsidiary B reports more than $5M, and Subsidiary C has a physical location in the US, would the parent organization and all of its subsidiaries be exempt based on the large operating company exemption?Each entity must meet all three requirements (e.g., more than 20 full time employees, operating presence at a physical office in the US, more than $5 million in sales or gross receipts) to qualify for the large operating company exemption. You may note however, that there is an exemption for subsidiaries of certain exempt entities – including for subsidiaries of large operating companies. Therefore, a subsidiary would qualify for this exemption if its ownership interests are controlled or wholly owned, directly or indirectly, by a large operating company.
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
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Can you speak to how the "subsidiary" exemption works for subsidiaries of "large operating company". In particular, what is the definition of “controlled” as used in the exemption for subsidiaries?The subsidiary exemption applies to any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by certain exempt entities, including large operating companies. The rule does not define “control” for purposes of the subsidiary exemption and FinCEN has not provided guidance on the issue. Therefore, it is up to each entity to determine if the subsidiary exemption applies to their specific situation.
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
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For a QSUB S-Corp group of corps/LLCs, filing as one 1120-S, how do we apply the 20 employee test and the 5mill gross receipts test?
A large operating company must employ more than 20 full time employees in the United States. Employee headcounts are done at the level of each individual LLC, corporation, or other entity. FinCEN declined to permit companies to consolidate employee headcount across affiliated entities. Thus, for example, parent companies cannot count employees of their subsidiaries, or vice versa.
A large operating company must have filed a Federal income tax or information return in the United States for the previous year demonstrating more than $5 million in gross receipts or sales. This excludes gross receipts or sales from sources outside the United States.
For an entity that is part of an affiliated group of corporations within the meaning of 26 U.S.C. 1504 that filed a consolidated return, the applicable amount is the amount reported on the consolidated return for the group. The entity must have reported this greater-than-$5 million amount as gross receipts or sales (net of returns and allowances) on the entity’s IRS Form 1120, consolidated IRS Form 1120, IRS Form 1120-S, IRS Form 1065, or other applicable IRS form.
Related resource: What is the large operating company exemption under the Corporate Transparency Act?
Liabilities and penalties
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What is the liability, if any, for a company applicant?The final reporting rule states as follows:
(g) Reporting violations. It shall be unlawful for any person to willfully provide, or attempt to provide, false or fraudulent beneficial ownership information, including a false or fraudulent identifying photograph or document, to FinCEN in accordance with this section, or to willfully fail to report complete or updated beneficial ownership information to FinCEN in accordance with this section. For purposes of this paragraph (g):
(1) The term “person” includes any individual, reporting company, or other entity.(2) The term “beneficial ownership information” includes any information provided to FinCEN under this section.(3) A person provides or attempts to provide beneficial ownership information to FinCEN if such person does so directly or indirectly, including by providing such information to another person for purposes of a report or application under this section.(4) A person fails to report complete or updated beneficial ownership information to FinCEN if, with respect to an entity:(i) such entity is required, pursuant to title 31, United States Code, section 5336, or its implementing regulations, to report information to FinCEN;(ii) the reporting company fails to report such information to FinCEN; and(iii) such person either causes the failure, or is a senior officer of the entity at the time of the failure. -
Are the individuals identified as filers subject to penalties related to reporting?The final rule’s penalty provision is as follows:
(g) Reporting violations. It shall be unlawful for any person to willfully provide, or attempt to provide, false or fraudulent beneficial ownership information, including a false or fraudulent identifying photograph or document, to FinCEN in accordance with this section, or to willfully fail to report complete or updated beneficial ownership information to FinCEN in accordance with this section. For purposes of this paragraph (g):
(1) The term “person” includes any individual, reporting company, or other entity.(2) The term “beneficial ownership information” includes any information provided to FinCEN under this section.(3) A person provides or attempts to provide beneficial ownership information to FinCEN if such person does so directly or indirectly, including by providing such information to another person for purposes of a report or application under this section.(4) A person fails to report complete or updated beneficial ownership information to FinCEN if, with respect to an entity:(i) such entity is required, pursuant to title 31, United States Code, section 5336, or its implementing regulations, to report information to FinCEN;(ii) the reporting company fails to report such information to FinCEN; and(iii) such person either causes the failure, or is a senior officer of the entity at the time of the failure.
Not-for-profits
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How does this impact HOAs that are not-for-profit but not technically exempt organizations?If an HOA is an LLC, corporation, or other entity created by the filing of a document with the Secretary of State or similar office, and does not qualify for the tax exempt entity exemption, or any other exemption, it is a reporting company and would be required to file a BOI report.
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My organization is a not-for-profit. It is a registered Corporation. Will I need to report?A corporation will have to file a BOI report unless it qualifies for an exemption. Not-for-profits are not necessarily exempt. However, one of the exemptions you might qualify for is for tax-exempt entities. This exemption applies to any entity that is:
(A) An organization that is described in section 501(c) of the Internal Revenue Code of 1986 (Code) (determined without regard to section 508(a) of the Code) and exempt from tax under section 501(a) of the Code, except that in the case of any such organization that ceases to be described in section 501(c) and exempt from tax under section 501(a), such organization shall be considered to continue to be described in this paragraph (c)(1)(xix)(A) for the 180-day period beginning on the date of the loss of such tax-exempt status;
(B) A political organization, as defined in section 527(e)(1) of the Code, that is exempt from tax under section 527(a) of the Code; or
(C) A trust described in paragraph (1) or (2) of section 4947(a) of the Code.
Ownership
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Do we need to report if ultimate owner is a state not individuals?
If the entity is an LLC, corporation, or other entity created by the filing of a document with a secretary of state or similar office under the laws of a state or Indian Tribe and not exempt, it must file a BOI report. In general, who the ultimate owner is, is not relevant to whether an entity has to file a report. One exception to that general rule is for entities controlled or wholly owned by certain exempt entities – who are themselves exempt. Whether an entity qualifies for an exemption must be determined on a case by case basis.
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What if the owner isn't an individual but another entity?The rule states that “the term ‘beneficial owner,’ with respect to a reporting company, means any individual who, directly or indirectly, either exercises substantial control over such reporting company or owns or controls at least 25 percent of the ownership interests of such reporting company”.
The definition is very broad. For example, the definition of an individual who exercises substantial control over a reporting company includes its senior officers, a person with authority over the appointment or removal of senior officers or a majority of the governing body, or an individual who directs, determines or has substantial influence over important decisions made by the reporting company. FinCEN has stated that it expects that every reporting company will be substantially controlled by one or more individuals, and therefore that every reporting company will be able to identify and report at least one beneficial owner to FinCEN.
In addition, an individual may indirectly own or control ownership interests, including by owning or controlling one or more intermediary entities, or the ownership interests of any intermediary entities, that separately or collectively own or control ownership interests of a reporting company. -
What if an entity isn't owned by an individual, but rather another entity. Do we still need to report to FinCEN?An entity is required to file a BOI report if it meets the definition of either a domestic or foreign reporting company. The term “domestic reporting company” means any entity that is a corporation, LLC or was created by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe. The term “foreign reporting company” means any entity that is a corporation, LLC, or other entity formed under the law of a foreign country and registered to do business in any State or tribal jurisdiction by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe. Whether the entity is owned by entities, individuals, or a combination of both is irrelevant for the purposes of determining whether the entity is a reporting company.In addition, in determining who the beneficial owners are of an entity that is owned by one or more other entities, note that the definition of beneficial owner is “any individual who, directly or indirectly, either exercises substantial control over such reporting company or owns or controls at least 25 percent of the ownership interests of such reporting company”. FinCEN has stated that it expects that every reporting company will be substantially controlled by one or more individuals, and therefore that every reporting company will be able to identify and report at least one beneficial owner to FinCEN. In addition, an individual may indirectly own or control ownership interests, including by owning or controlling one or more intermediary entities, or the ownership interests of any intermediary entities, that separately or collectively own or control ownership interests of a reporting company.
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What about indirect ownership?
Individuals may directly or indirectly own or control ownership interests. FinCEN, in the Small Business Compliance Guide, provides the following two examples of indirect ways to own or control ownership interests in a reporting company:
(1) Owning or controlling one or more intermediary entities, or the ownership interests of any intermediary entities, that separately or collectively own or control ownership interests of a reporting company, and
(2) Through another individual acting as a nominee, intermediary, custodian or agent.
Guidance on Practice of Law
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Is compliance with CTA the obligations/responsibility of the Company (company tax reporting) or the Individual (as part of the individual tax reporting)? Who should be reporting the IRS?
BOI reporting under the CTA is separate from any reporting required by the IRS or any other governmental agency. Reports are filed with FinCEN and FinCEN is the agency responsible for enforcing the CTA. Reporting companies, individuals, and other entities can be held liable for violations of the CTA.
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There is a some commentary from CPAs, accountants, accounting firms and their insurance carriers, that a CPA or accountant that assists a client in complying with the CTA including the analysis of whether the entity is a Reporting Company, whether any of the exemptions apply, what constitutes substantial control and/or an ownership interest, would constitute an unauthorized practice of law. Certainly there are many CPAs and accountants who would be asked to do this in addition to third-party service companies . Is there any guidance on this?The definition of “unauthorized practice of law” is governed by state law and rules of ethics. It can vary from state to state. Anyone concerned that their activities may violate the unauthorized practice of law should consult with an attorney familiar with the issue.
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If a CPA prepares the FINCEN report, our insurance carrier has stated that such reporting is considered to be illegal practice of law without a license? Thoughts?The definition of “unauthorized practice of law” is governed by state law and rules of ethics. It can vary from state to state. Anyone concerned that their activities may violate the unauthorized practice of law should consult with an attorney familiar with the issue.
Expert Insights
File your BOI report
Complete a Beneficial Ownership as well as updates every time company or owner information changes.
Beneficial Ownership Filing Options
ID verification
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Does FINCEN Id change when a company / business changes or reorganizes. Changes from an LLP/LLC to a Incoporation etc.If a reporting company obtains a FinCEN identifier, the reporting company must file an update with FinCEN upon a change in the information required to be reported. So if the business changes or reorganizes, the need to file an update will depend upon whether that change or reorganization resulted in a change in the reported information. For example, if the reporting company obtained a new EIN, that would be a change requiring an update.
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Will FinCEN notify someone when their ID is expiring?A FinCEN identifier does not expire.
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Do update filings have to be made each time a beneficial owner's ID expires?The final rule states “With respect to an image of an identifying document required to be reported pursuant to paragraph (b)(1)(ii)(E) of this section, a change with respect to required information will be deemed to occur when the name, date of birth, address, or unique identifying number on such document changes.” So if the only change is the expiration date, an update would not be required.
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Will FinCen accept foreign documents (such as a foreign passport) as an ID for beneficial owners that are non-US Citizens or non-US residents? Or is the ID required to be a US-issued ID?A non-expired passport issued by a foreign government to the individual is acceptable only if the individual does not possess a US passport, state driver’s license, or identification document issued by a state, local, or tribal document.
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Has FinCEN advised if we can redact the photo to remove home address for the company applicant?FinCEN has not indicated that any information may be redacted from the identification document.
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Does applicant need to upload copy of id?The initial report of a domestic reporting company created or foreign reporting company first registered on or after January 1, 2024 must include, for its company applicant or applicants, an image of the document from which the unique identifying number was obtained. If the company applicant applies for a FinCEN identifier, then the application for the FinCEN identifier must include the image of the document.
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Is a social security number required for personal information needed?The personal information that must be reported is the individual's legal name, date of birth, home address (except for certain company applicants who must give their business address), unique number and issuing jurisdiction from an acceptable document such as a passport or driver's license, and an image of the document.
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How do we apply for a FinCEN identifier?Applications for a FinCEN identifier must be submitted electronically to FinCEN via its website. The application must contain the same information that otherwise would be reporting in the BOI report. FinCEN has indicated that immediately after submission the individual will receive their FinCEN identifier. FinCEN will not begin accepting applications until January 1, 2024.
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Is the application process for FinCen Identifier available yet for a company application to apply for?FinCEN will not accept applications for a FinCEN identifier until January 1, 2024. Applications for a FinCEN identifier will be submitted electronically to FinCEN via its website. The application must contain the same information that otherwise would be reporting in the BOI report. FinCEN has indicated that immediately after submission the individual will receive their FinCEN identifier.
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Is it possible to apply for an identifier yet?FinCEN will not accept applications for a FinCEN identifier before January 1, 2024.
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Did you say that you can OR cannot use a business address for a beneficial owner instead of a private residential address?The reporting company must report in its BOI report (or an application for a FinCEN identifier must set forth) the residential street address of the beneficial owner.
Trusts
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For a property holding trust, is it necessary to disclose information regarding the trustee(s) if he/they are not the beneficiary(ies) of the trust?
If the trust is a reporting company and the trustees meet the definition of beneficial owner, or in the case of trusts created or registered on or after January 1st, 2024, a company applicant, the trustees’ information must be reported. FinCEN’s Small Entity Compliance Guide includes the following guidance:
“Note for trusts: a trustee of a trust or similar arrangement may exercise substantial control over a reporting company.”
“Note for trusts: The following individuals may hold ownership interests in a reporting company through a trust or similar arrangement: • A trustee or other individual with the authority to dispose of trust assets. • A beneficiary who is the sole permissible recipient of trust income and principal or who has the right to demand a distribution of or withdraw substantially all of the trust assets. • A grantor or settlor who has the right to revoke or otherwise withdraw trust assets.”
Requirement to file
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Would joint ventures be included under other entities?If the joint venture is created by the filing of a document with a secretary of state or similar office under the laws of a state or Indian Tribe or formed under the law of a foreign country and registered to do business in any state or Tribal jurisdiction by the filing of a document with a secretary of state or similar office, it will have to file a BOI report if not exempt.
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Not sure if an "S" Corp where I am the only person in the corporation must file? I am a Realtor.Every corporation must file a BOI report unless it qualifies for an exemption. Whether a corporation is taxed under Subchapter S or Subchapter C is not relevant nor is the number of the corporation’s owners. The kind of business that the corporation operates is only relevant for determining if the corporation qualifies for an exemption. Whether any corporation qualifies for an exemption must be determined on a case by case basis.
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What are the reporting requirements for a corporate entity in which no one person or organization owns more than 25% of shares?Every corporation must file a BOI report unless it qualifies for an exemption. If there is no individual who directly or indirectly owns at least 25% of its ownership interests then the corporation will report all of the individuals who directly or indirectly exercise substantial control over the corporation. Those individuals are its beneficial owners. If the corporation was created (or in the case of a foreign corporation, registered to do business for the first time) on or after January 1, 2024 it must also report its company applicant or applicants.
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Will a 100% ESOP S-corp company be exempt?There is no specific exemption for ESOPs. Whether the corporation qualifies for one of the 23 exemptions must be determined on a case by case basis. Whether a corporation is taxed under Subchapter S or Subchapter C of the Internal Revenue Code is not relevant.
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Would we still need to file for companies that are dissolved in 2024?Neither the reporting rule nor CTA address that issue and FinCEN has not yet provided any guidance. As such it is a legal determination that will have to be made by the company.
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If we are unsure, or if the guidance is unclear, is it better to simply file reporting for the entity?That is for the company to determine. Obtaining legal advice might be advisable.
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Does the CTA apply to a PLLP, such as a domestic law firm?If the Professional Limited Liability Partnership is an entity created by the filing of a document with a secretary of state or similar office under the laws of a state or Indian Tribe, it will have to file a BOI report if not exempt. The determination as to whether any entity other than a corporation or LLC, including a PLLP, can be a reporting company is a legal determination. It must be made on a case by case basis as state laws vary and is for the PLLP to determine.
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What year is the $5M in gross receipts determined on? The prior year so its a year-by-year test?The $5 million in sales or gross receipts must be demonstrated in a company’s federal income tax or information return for the previous year. So it is a year-by-year test.
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What if we dissolve an entity after i had filed a BOI?FinCEN’s Small Business Compliance Guide states “Note: There is no requirement to report a company’s termination or dissolution.” However, it should still be noted that an updated report is required upon a change in the reported information about the company or it beneficial owners.
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What is our obligation is the company's stock is 100% owned by a China company, not an individual?The company will be required to file a BOI report if it meets the definition of a domestic or foreign reporting company (e.g., it is an LLC, corporation, or other entity created by filing a document with a secretary of state or similar office or created under the laws of a foreign country and registered with a state by filing a document with a secretary of state or similar office and it does not qualify for one of the 23 exemptions.)
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I am a single employee LLC offering consulting services. I have no clients currently. Do I file?An LLC must file a BOI report unless it qualifies for one of the 23 exemptions.
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What about Professional Corporations?Corporations, LLCs, and other entities created by the filing of a document with the Secretary of State must file a BOI report unless they qualify for an exemption.
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Does SEC issuer cover "Reg D" filers?The final rule defines securities reporting issuer, for the purposes of the exemption, as follows:
Securities reporting issuer. Any issuer of securities that is:
- An issuer of a class of securities registered under section 12 of the Securities Exchange Act of 1934); or
- Required to file supplementary and periodic information under section 15(d) of the Securities Exchange Act of 1934
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CPA firm does not have to file?There is an exemption for accounting firms. It applies to any public accounting firm registered in accordance with section 102 of the Sarbanes-Oxley Act of 2002. If the CPA firm does not qualify for that exemption, or any other exemption, and it is a corporation, LLC, or other entity created by filing a document with a secretary of state or similar office, it would have to file a BOI report.
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Do law firms have to report?If the law firm is a corporation, LLC, or other entity created by filing a document with a secretary of state or similar office, and it does not qualify for one of the 23 exemptions, it would have to file a BOI report. There is no exemption for law firms among the 23 exemptions.
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So an entity that is dissolved prior to 12-31-23 will still need to report?We are waiting for guidance from FinCEN on the issue of whether a BOI report would have to be filed.
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The only companies that need to report directly to the government are the ones that provide financial services, correct? My company is a retailer that sells tangible inventory, we need to report our ownership to other companies that submit the report to the government. Am I understanding that correctly?Every corporation, LLC, or other entity created by filing a document with the secretary of state or similar office must file a BOI report unless it qualifies for an exemption. It is not limited to entities engaged in financial services. The type of business the corporation, LLC or other entity is engaged in is only relevant in determining whether it qualifies for an exemption. There is no specific exemption for retailers.
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If an individual is a state licensed insurance producer but operates in an S Corp form, does the S Corp have to report?Every corporation must file a BOI report unless it qualifies for an exemption. It does not matter if the corporation is taxed under Subchapter C or Subchapter S. You should review all 23 exemptions before determining whether your corporation must file a report. However, you should note that there is an exemption for a state licensed insurance producer, which is defined as any entity that:
- Is an insurance producer that is authorized by a State and subject to supervision by the insurance commissioner or a similar official or agency of a State; and
- Has an operating presence at a physical office within the United States.
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If it requires a tax return from the prior year to be an exempt entity, does that mean that no new entities can be exempt because they don't have a prior year's tax return?A newly created entity will not qualify for the large operating company exemption because of the requirement to have filed a tax return for the previous year demonstrating $5 million in gross receipts or sales. However, whether a new entity will have to file a BOI report depends upon whether the entity meets the definition of a domestic reporting company (e.g., an LLC, corporation, or other entity created by filing a document with a secretary of state or similar office) and whether it qualifies for any other exemption.
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What about an affiliate of insurance company, e.g., a services company that exists only to provide services to its affiliated insurance company, or a holding company of an insurance company?If the affiliate of the insurance company is a corporation, LLC, or other entity created by filing a document with a secretary of state or similar office, and it does not qualify for one of the 23 exemptions, it would have to file a BOI report. There is no specific exemption for companies providing services to insurance companies or for holding companies of an insurance company. You should review all 23 exemptions to determine if the affiliate qualifies as, for example, a large operating company or subsidiary of an exempt entity, or for any of the other 23 exemptions.
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What about an affiliate of insurance company, e.g., a services company that exists only to provide services to its affiliated insurance company, or a holding company of an insurance company?If the affiliate of the insurance company is a corporation, LLC, or other entity created by filing a document with a secretary of state or similar office, and it does not qualify for one of the 23 exemptions, it would have to file a BOI report. There is no specific exemption for companies providing services to insurance companies or for holding companies of an insurance company. You should review all 23 exemptions to determine if the affiliate qualifies as, for example, a large operating company or subsidiary of an exempt entity, or for any of the other 23 exemptions.
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Is a C corp with just one sole shareholder (a U.S. Citizen) and an existing LEI (Legal Entity Identifier), less than $5 million sales, have to file?Every corporation must file a BOI report unless it qualifies for an exemption. It does not matter if the corporation is taxed under Subchapter C or Subchapter S or if it does or doesn’t have an LEI. You should review all 23 exemptions before determining whether your corporation must file a report. (You may note, however, that if the corporation has less than $5 million in sales or gross receipts as reported on its previous year’s federal tax return it could not qualify for the large operating company exemption.)
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The slide deck says Foreign reporting companies - created under foreign law - have to file, but I think you said "entities formed in the US but doing business outside the US" so can you explain this please?
There are two kinds of reporting companies – domestic reporting companies and foreign reporting companies.
The term “domestic reporting company” means any entity that is:
- A corporation;
- A limited liability company; or
- Created by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe.
The term “foreign reporting company” means any entity that is:
- A corporation, limited liability company, or other entity;
- Formed under the law of a foreign country; and
- Registered to do business in any State or tribal jurisdiction by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe.
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Is a single asset entity required to file a CTA? No incomeIf the entity is a corporation, LLC, or other entity created by filing a document with a secretary of state or similar office, and it does not qualify for one of the 23 exemptions, it would have to file a BOI report. There is specific exemption for an entity that owns a single asset or that has no income. You should review all 23 exemptions to see if any apply to your company.
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So there is no exemption for small business (less than x employees, or less than $x revenue)?No there isn’t. The Corporate Transparency Act was enacted to collect beneficial ownership information from small LLCs, corporations and other entities. The only exemption based on the number of employees and revenue is the large operating company exemption which only applies to entities with more than 20 employees and more than $5 million in sales or gross receipts for the previous year. Other exemptions are mainly for entities already subject to government regulation such as publicly traded companies, banks, insurance companies, and accounting firms.
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Our corporate ownership structure has no natural persons owning any portion of our legal entity structure up to a foreign state-owned entity. Are we exempt from reporting?Every corporation is required to file a BOI report unless it qualifies for one of the 23 exemptions. There is no exemption based on not having natural persons as owners. And every reporting company will have beneficial owners even if they are directly owned by other entities as there will be individuals who qualify as beneficial owners because they have substantial control over the reporting company. There may also be beneficial owners who indirectly own 25% or more of the ownership interests of the reporting company.
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So a company that is fully remote within the US wouldn't count?FinCEN has not provided guidance regarding whether fully remote entities can qualify for the large operating company exemption. You will have to determine if your company's situation meets the definition of the term “has an operating presence at a physical office within the United States” , which means that the company regularly conducts its business at a physical location in the United States that it owns or leases and that is physically distinct from the place of business of any other unaffiliated entity.
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What is the entity is fully remote. Does that mean no operating presence?FinCEN has not provided guidance regarding whether fully remote entities can qualify for the large operating company exemption. You will have to determine if your company's situation meets the definition of the term “has an operating presence at a physical office within the United States” , which means that the company regularly conducts its business at a physical location in the United States that it owns or leases and that is physically distinct from the place of business of any other unaffiliated entity.
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If we have a leased space but operate remotely, does that qualify under the physical location in the US?FinCEN has not provided guidance on the consequences of having a remote, online or virtual office. The term “has an operating presence at a physical office within the United States” means that an entity regularly conducts its business at a physical location in the United States that the entity owns or leases and that is physically distinct from the place of business of any other unaffiliated entity. You will have to determine if your specific situation fits within this definition.
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What about pass through entities (LLCs)?Every LLC is required to file a BOI report unless it qualifies for an exemption. It does not matter how it is taxed for federal income tax purposes.
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A one-person LLC generating $50k revenue must report?Every LLC is required to file a BOI report unless it qualifies for an exemption. It does not matter how many owners it has and the only time revenue is relevant is in determining if an entity qualifies for the large operating company exemption (which applies to entities with more than $5 million in sales or gross receipts).
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Does a remote-first company with no office site that employees are required to report to. It has a US "virtual office" that has physical space to use, but no one is required to report there.FinCEN has not provided guidance on the consequences of having a remote, online or virtual office. You will have to determine if your "office" situation meets the definition of the term “has an operating presence at a physical office within the United States”, which means that an entity regularly conducts its business at a physical location in the United States that the entity owns or leases and that is physically distinct from the place of business of any other unaffiliated entity.
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Does a holding company have to report too?The holding company will have to file a BOI report if it is a corporation, LLC, or other entity created by the filing of a document with a secretary of state or similar office and it does not qualify for an exemption. There is an exemption for bank holding companies. Otherwise there is no specific exemption for holding companies.
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Do you need to file each time you begin doing business in a new state and register with a new Secretary of State?After the initial BOI report is filed, an updated BOI report is required only upon a change in the information reported about the company or its beneficial owners. Domestic reporting companies do not report information about the states where they have registered to do business. Foreign reporting companies only report information about which state was the first state where they registered to do business.
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What if the Reporting company is a disregarded entity for tax purposes?An entity that meets the definition of a reporting company must file a BOI report regardless of how it is taxed for federal income tax purposes. Note that the final rule requires a reporting company to provide its Taxpayer Identification Number. The IRS defines Taxpayer Identification Numbers as to include the following:
- Social Security number "SSN"
- Employer Identification Number "EIN"
- Individual Taxpayer Identification Number "ITIN"
- Taxpayer Identification Number for Pending U.S. Adoptions "ATIN"
- Preparer Taxpayer Identification Number "PTIN
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Will a condo association be required to file?If the condo association is a corporation, LLC, or other entity that was created by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe it will have to file a BOI report unless it qualifies for one of the 23 exemptions. You should review the list of exemptions to determine if your condo association qualifies for one.
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So a COO or CFO would need to file even though they have NO ownership?A beneficial owner is any individual who, directly or indirectly, either exercises substantial control over a reporting company or owns or controls at least 25 percent of the ownership interests of the reporting company. The individual does not have to be both. An individual exercises substantial control over a reporting company if the individual serves as a senior officer of the reporting company, which includes any individual holding the position or exercising the authority of a president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer, regardless of official title, who performs a similar function. Accordingly, a senior officer of a reporting company is a beneficial owner regardless of whether the individual has an ownership interest.
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Do tax disregarded entities need to file a report?Any entity that is a corporation, LLC or was created by the filing of a document with a secretary of state or any similar office is required to file a BOI report unless it qualifies for an exemption. There is no exemption for entities that are disregarded for federal income tax purposes. You should review the 23 exemptions to see if any apply to your specific situation.
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So, if formed by 12/31/23, no reporting requirement?Every reporting company formed before January 1, 2024 must file an initial BOI report by January 1, 2025. However, as an existing entity you will not have to report information on your company applicant.
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Can you repeat what you said about entities formed before 1/1/24 and company applicants?Reporting companies formed before January 1, 2024 do not report information about their company applicants.
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So if your company was formed before 1/1/24 a company does not need to reportEvery reporting company formed before January 1, 2024 must file an initial BOI report by January 1, 2025. However, as an existing entity you will not have to report information on your company applicant.
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In what ways is a company registered with the Commodity Futures Trading Commission subject to the CTA?The final rule contains the following exemption:
“Commodity Exchange Act registered entity. Any entity that:- Is a registered entity as defined in section 1a of the Commodity Exchange Act (7 U.S.C. 1a); or is
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- A futures commission merchant, introducing broker, swap dealer, major swap participant, commodity pool operator, or commodity trading advisor, each as defined in section 1a of the Commodity Exchange Act (7 U.S.C. 1a), or a retail foreign exchange dealer as described in section 2(c)(2)(B) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)(B); and
- Registered with the Commodity Futures Trading Commission under the Commodity Exchange Act.”
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Is there a filing window that the filing has to be completed by that date?A domestic reporting company created before January 1, 2024 and a foreign reporting company registered before January 1, 2024 must file its initial BOI report no earlier than January 1, 2024 and no later than January 1, 2025. As the rule currently reads a reporting company created or first registered on or after January 1, 2024 has 30 calendar days from the earlier of the date it receives actual notice of its creation or registration or when the secretary of state provides public notice of its creation of registration to file its initial report. However FinCEN has proposed an extension to 90 days for companies created or first registered in 2024.
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If ownership is held in a trust – how deep do you need to go in reporting beneficial ownership? The trustees? Current beneficiaries? Both?
Regarding trusts, FinCEN’s Small Business Compliance Guide states the following:
A trustee of a trust or similar arrangement may exercise substantial control over a reporting company.The following individuals may hold ownership interests in a reporting company through a trust or similar arrangement:
- A trustee or other individual with the authority to dispose of trust assets.
- A beneficiary who is the sole permissible recipient of trust income and principal or who has the right to demand a distribution of or withdraw substantially all of the trust assets.
- A grantor or settlor who has the right to revoke or otherwise withdraw trust assets.
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I am pretty sure I had a BOI requirement on a recent real estate closing wherein the buyer was an LLC. The BOI was presumably handled through the title company who was to submit to FinCEN. You mention that BOI is filed 1 time. Are individual real estate transactions still required to file a BOI for each transaction?An initial BOI report must be filed with FinCEN by every LLC, corporation, or other entity created by filing a document with a secretary of state or similar office or formed under the law of a foreign country and registered to do business in the US by filing a document with a secretary of state or similar office, unless that LLC, corporation, or other entity qualifies for an exemption. After the initial report is filed upated reports are required only upon a change in the information reported about the company or its beneficial owners. Reporting under the CTA is separate from FinCEN’s Geographic Targeting Order, which requires a title company to report the identity of owners of LLCs and corporations that make certain purchases of real estate.
Questions from prior webinars
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Does an LLC formed in the US and subsequently acquired by a foreign entity who becomes the sole owner have to file a report?Any entity that meets the definition of a reporting company will be required to file an initial report. Changes in information reported (other than information for the company applicant) will require an updated report.
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What does PII mean?Personally identifiable information – which is information that is used to identify an individual.
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How are the total ownership interests of a reporting company calculated?
The final reporting rule states that in determining whether an individual owns or controls at least 25 percent of the ownership interests of a reporting company, the total ownership interests that an individual owns or controls, directly or indirectly, shall be calculated as a percentage of the total outstanding ownership interests of the reporting company as follows:
(A) Ownership interests of the individual shall be calculated at the present time, and any options or similar interests of the individual shall be treated as exercised;
(B) For reporting companies that issue capital or profit interests (including entities treated as partnerships for federal income tax purposes), the individual's ownership interests are the individual's capital and profit interests in the entity, calculated as a percentage of the total outstanding capital and profit interests of the entity;
(C) For corporations, entities treated as corporations for federal income tax purposes, and other reporting companies that issue shares of stock, the applicable percentage shall be the greater of:
(1) the total combined voting power of all classes of ownership interests of the individual as a percentage of total outstanding voting power of all classes of ownership interests entitled to vote, or
(2) the total combined value of the ownership interests of the individual as a percentage of the total outstanding value of all classes of ownership interests; and
(D) If the facts and circumstances do not permit the calculations described in either paragraph (d)(2)(iii)(B) or (C) to be performed with reasonable certainty, any individual who owns or controls 25 percent or more of any class or type of ownership interest of a reporting company shall be deemed to own or control 25 percent or more of the ownership interests of the reporting company.
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What if beneficial owners are all international, therefore have no passport, etc.?The final reporting rule does not address the situation where an individual does not have one of the authorized documents containing a unique number. You might consider contacting the FinCEN regulatory support section regarding that situation.
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What if all beneficial owners of your company are entities? What will need to be reported?Please see the final reporting rule’s definition of beneficial owner (set forth above). A beneficial owner is defined as an individual. The identity of the individuals who either directly or indirectly have either substantial control or are 25% owners will vary depending upon the unique circumstances of each reporting company. However, the definition of substantial control includes several roles that are provided by individuals.
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If all owners of more than 25% are reported as beneficial owners, is it necessary to report anyone else with substantial control?Information must be reported on all individuals who meet the definition of beneficial owner – which includes those with substantial control and those with 25% ownership. (Please see the definition of beneficial owner above for the exact language of the final rule).
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Can you look at multiple companies’ total sales in order to determine if a company can qualify for the large company exemption?The definition of large operating company states “For an entity that is part of an affiliated group of corporations within the meaning of 26 U.S.C. 1504 that filed a consolidated return, the applicable amount shall be the amount reported on the consolidated return for such group.”
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What if a member of your entity will not cooperate in providing information (e.g., won't give a copy of ID) needed for filing?The final rule does not address that situation. You may wish to contact the FinCEN regulatory support section for clarification.
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Do offshore companies created in the US but with no business in US need to report?Please see the definition of a reporting company and the list of exemptions to determine if the offshore company would be required to report.
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How are law firms categorized as company applicants on existing entities?Entities existing before January 1, 2024 are not required to report company applicant information.
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Where a corporation is owned by a US holding company and the US holding company is owned by a foreign holding company, does the US holding company have to file a report?Any entity that meets the definition of a domestic reporting company (LLC, corporation or other entity created by filing a document with a state. See full definition above), and does not qualify for one of the 23 exemptions is required to file a report.