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The Wealth & Wisdom Blog

Information on Estate Planning, Estate and Trust Administration and Unique Asset Planning

In a few weeks, many of us will complete online NCAA Basketball Tournament brackets for office or family pools.  My team selections are generally not based on any knowledge of a team’s merits, but instead on their geographic location, conference membership or, if my daughter is looking over my shoulder at the time of my selections, her appreciation for a team’s mascot or colors.  All told, it will take me no less than 5-10 minutes to complete the NCAA bracket.  Of course, I don’t anticipate winning prizes based on my “mascot and colors” approach.

A few weeks ago, I completed a Beneficial Interest Ownership Report.  As an owner of a “Registered Company,” I am required to report my interest in accordance with the Corporate Transparency Act.1  In my case, I gathered the necessary information to report on the federal website (“Fin Cin”) ahead of time.  It took me about 10 minutes to complete the online Beneficial Ownership Report on the Fin Cen website, about as long as the completion of my NCAA Basketball bracket. 2

In this month’s update, I briefly describe who is required to file a Beneficial Interest Ownership Report and what information needs to be gathered to complete the Beneficial Ownership Report.

Who is Required to Report

All for-profit business entities, such as corporations and LLCs, are “Reporting Companies” unless a specific exemption applies.  The most common exceptions (see a complete list here) are large companies already under federal oversight, such as publicly traded companies, investment companies and investment advisors.

What Information is Required

A Reporting Company needs to gather and provide the following information:

  • Full Legal Name of Organization;
  • “DBA” names / previous names used by the business;
  • Complete current street address of the principal place of business;
  • State of Incorporation or organization; and
  • The EIN.

 A Reporting Company must also report all “Beneficial Owners.”  A Beneficial Owner is any person who either (i) holds directly or indirectly ownership of at least 25% of the Reporting Company; or (ii) exercises “substantial control” over the Reporting Company.

“Indirect ownership” would include, in the case of a revocable trust, only those who have a current right to assets or the right to revoke the trust. In the case of an irrevocable trust,  a beneficial owner includes the current trustees as well as current adult beneficiary (or beneficiaries) of such trusts. 3 “Substantial control” means any individuals holding leadership positions or who otherwise have substantial influence within the Reporting Company.

For each Beneficial Owner, the following information needs to be gathered:

  • Full legal name;
  • Date of birth;
  • Pdf copy of current driver’s license or pdf copy of current passport; and
  • Current residential address.

Ongoing Reporting Obligations

Unlike the NCAA Brackets, the BOI report is not a “one and done” type of filing.  The most noteworthy aspect of the Corporate Transparency Act is the importance of updating a Fin Cen registration whenever any changes occur in the life of the Beneficial Owner or the business arrangements of the Reporting Company.  For example, if a Beneficial Owner changes her address, or if a child who is a beneficiary of an irrevocable trust holding ownership interests becomes an adult, Fin Cen must be notified immediately.  According to the statute, fines of $500 per day, up to $10,000, will be imposed on those who fail to update their registration with Fin Cen if their minor children come of age, their address changes, or even their driver’s license expires.

I recognize that for many Reporting Companies, proper compliance with the Corporate Transparency Act will require the assistance of legal counsel.  In that regard, our law firm will be assisting our clients with ascertaining reporting obligations under the Corporate Transparency Act.  Of course, my colleagues and I would be glad to speak with you or your clients with any general questions about the Corporate Transparency Act and any possible reporting requirements.  In the meantime, good luck with your NCAA brackets.