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Corporate Transparency Act Frequently Asked Questions

For those who are officers, members, or owners of an LLC or corporation, you most likely have been informed of the Corporate Transparency Act (“CTA”). GGTM has worked diligently to notify our corporate clients of the act over recent months and are continuing to ensure our clients are up to date on the most recent news regarding the matter. As we have delivered notifications to clients, we have been met with insightful questions that are important to share as the deadline to file approaches. Below are the six most common questions we have encountered over the past months:

1. Does filing my taxes suffice for the reporting requirements of the Beneficial Ownership Information report (“BOI”) sent to Financial Crimes Enforcement Network (“FinCEN”)?

Unfortunately, no. The CTA involves reporting requirements to FinCEN rather than the IRS. Though the information included in your annual tax filing contains much of the information required for the BOI, the two reports are sent to different arms of the U.S. Treasury Department. Though this is an inconvenience, the good news is that once a BOI is filed, you are only required to file further BOIs if there are any subsequent changes in the information contained in your BOI. 

2. What if my company has a significant number of shareholders?

Determining who is required to be reported in a BOI is an important first step in the process. FinCEN has detailed specific requirements as to who is considered a “beneficial owner”:

• Anyone who directly or indirectly exercises “substantial control” over a company, which includes anyone who:
  • Is a senior officer
  • Has authority to appoint or remove certain officers or a majority of directors
  • Is an important decision-maker
  • Has any other form of substantial control over the company
• OR Anyone who owns at least 25% of the “ownership interests” of a company, which includes:
  • Voting Rights
  • Equity
  • Stock
  • Capital or Profit Interest
  • Convertible Instruments
  • Any other option or privilege

3. What information do I need to be ready to send to my attorney if I choose to have them file my BOI report?

There are two separate categories for this answer: what the company needs to report, and what each owner needs to report. As an important note, it is important to include all subsidiary LLCs and companies, as well as any other LLCs or companies you may have formed but not maintained in recent times. Our attorneys will be able to help you determine which entities need to file and can advise on any actions required for companies not required to file. Listed below are the requirements for each:

Company:

• Full name and any DBAs
• Current Address
• State in which the company was formed
• EIN or TIN

Ownership:

• Full Legal Name
• Date of Birth
• Current Address
• A photo/copy of one of the following documents:
  • U.S. Passport
  • State Driver’s License
  • State Issued Identification
  • Tribal Issued Identification
  • Foreign Issued Passport

4. What businesses are exempt, and how do I know if my business is required to report or not?

The key piece of information in determining exemption status is the type of entity that your business is structured as. There are 23 separate types of entities that are exempt from the act, but each must meet certain criteria in order to achieve that exemption.  If you are unsure whether or not you are exempt, we recommend reaching out to an attorney to provide a definitive answer.

5. What happens if I don’t file my report before the deadline, or even at all?

At this point, FinCEN is doing its best to achieve compliance—it is not looking to issue penalties. However, that will change in the near future. The act states that the failure to report complete and accurate information to FinCEN may result in civil or criminal penalties. The civil penalties levied can be as severe as $500 per day that a complete and accurate report is not filed, and the criminal penalties can be as severe as a $10,000 fine and up to two years imprisonment. These penalties will be weighed on senior officers in the entity that have failed to accurately report their information.

6. What if part of the ownership in my company is held in a trust?

If “substantial control” of your entity is held in a trust, or if a trust owns more than 25% of “ownership interests”, the Trustee, any Beneficiaries, and the Grantor or Settlor must all provide the information required in the BOI.

At GGTM, we realize that no two businesses are identical. Our wealth of experience serving businesses here in West Michigan has equipped us to address the nuances of the CTA decisively.  As we have noted in our notifications to corporate clients, the CTA is facing scrutiny in federal courts, and is the subject of litigation; however, the act is still in effect. While we understand frustrations with these new reporting requirements, GGTM is here to assist your business with any questions or needs you may have.

If you have any further questions regarding the CTA or any corporate matter, please contact our office so we can discuss possible solutions or schedule a consultation.

GGTM Law

We are a client-centric boutique law firm in Muskegon, Michigan, comprised of experienced Muskegon attorneys committed to serving the legal needs of a wide variety of businesses and individuals in Muskegon, Grand Rapids, Grand Haven, Spring Lake, Holland, throughout West Michigan, and beyond.