With Cornerstone Law Offices, P.C., you’ll be notified when it’s time to file your report based on your business and your formation date. We’ll create an accurate report that includes the identifying information about the individuals who own or control your business. Then, we’ll timely file your report with the Financial Crimes Enforcement Network and confirm successful completion for easy compliance and peace of mind.

A beneficial owner is an individual who directly or indirectly: (1) owns or controls at least 25% of your company’s ownership interests, or (2) exercises substantial control over your business. If you're not sure, you can always talk to an attorney from our legal network.

Examples of beneficial ownership and beneficial owners with substantial control include:

• An important decision-maker for the reporting company
• A senior officer (president, chief executive officer, chief financial officer, general counsel, chief operating officer, or any other officer with a similar function)
• An individual with the authority to appoint or remove officers or directors (or similar body) of the company

The Beneficial Ownership Information Reporting Rule under the Corporate Transparency Act mandates the identification of individuals who benefit from a legal entity. The rule is in place to provide transparency, and it helps the federal government crackdown on financial crimes and fraud, such as money laundering, corruption, human trafficking, drug trafficking, tax fraud, and fraud against employees, customers, and other businesses.

Effective Jan. 1, 2024, beneficial ownership information reporting is a legal requirement under the Corporate Transparency Act and supports the ongoing focus and efforts of the U.S. government to deter those who would otherwise hide or benefit from actions that harm others.

A beneficial owner is required to provide their legal name, date of birth, address, percentage of ownership, and an image of an acceptable identification document, such as a passport or driver's license, along with the issuing jurisdiction and the document's ID number.

The Financial Crimes Enforcement Network lists 23 types of exempt business entities that do not qualify as reporting companies under the reporting requirement.

• Securities reporting issuer
• Governmental authority
• Bank
• Credit union
• Depository institution holding company
• Money services business
• Broker or dealer in securities
• Securities exchange or clearing agency
• Other Exchange Act registered entity
• Investment company or investment adviser
• Venture capital fund adviser
• Insurance company
• State-licensed insurance producer
• Commodity Exchange Act registered entity
• Accounting firm
• Public utility
• Financial market utility
• Pooled investment vehicle
• Tax-exempt entities
• Entity assisting a tax-exempt entity
• Large operating company
• Subsidiary of certain exempt entities
• Inactive entity

Companies qualify as tax-exempt entities if they meet any of the following criteria:

• The IRS considers them exempt entities under section 501(c) of the Internal Revenue Code (this will include many entities with nonprofit organization status).
• They lost tax-exempt status under the code less than 180 days prior.
• They are political organizations as defined under section 527(a) of the code.
• They are trusts as defined under section 4947(a) of the code.

The agency defines a large operating company as meeting all of the following criteria:

• It is otherwise subject to a federal regulatory regime.
• It has over 20 people with full-time employment status in the U.S.
• It has more than $5 million in gross receipts or sales on a prior year's tax return filed with the IRS, excluding foreign receipts.
• It has a physical operating presence in the U.S.
• It is owned by an entity already exempt under the Corporate Transparency Act.
• It is otherwise designated as exempt by the Secretary of the Treasury and the U.S. Attorney General.

A reporting company must be an active business, and inactive entities are not required to report. The Financial Crimes Enforcement Network defines an inactive entity as meeting all of the following criteria:

• It was created before Jan. 1, 2020.
• It is not engaged in active business.
• It is not owned by a foreign person, resident, domestic partnership, corporation, or other estate or trust.
• It has not sent or received over $1,000 while transacting business in the last year.
• It has no assets, including ownership of other companies, in the U.S. or elsewhere.

The Corporate Transparency Act exempts certain people from the beneficial owner definition, including:

• Minors
• Individuals acting as nominees, intermediaries, custodians, or agents on behalf of someone else
• Employees who are not senior officers and whose only interest or control is derived solely from their employment status
• Individuals whose only interest in a reporting company is derived solely from the right of inheritance
• Contingent trust beneficiaries
• Creditors whose only interest is to recover business debts

Corporations and limited liability companies (LLC) will be required to report identifying information about the individuals who own or control a business with the Financial Crimes Enforcement Network to satisfy requirements under the Corporate Transparency Act. This new requirement applies to most business entities unless an exception applies.

The Corporate Transparency Act is legislation that changes the reporting requirements for beneficial ownership information of business owners operating in the United States. It requires businesses to identify and document any person who holds a 25% or greater ownership interest or exercises substantial control over the company.

Under the Corporate Transparency Act, most reporting companies must file information on each beneficial owner with the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN). FinCEN has developed a database that holds information about each beneficial owner documented by a reporting company.

Members, or owners, of a limited liability company (LLC) are likely designated beneficial owners under the beneficial owner definition of the rule and need to file the new report with the federal agency and provide basic contact information about the company and its owners.

This requirement applies to single-member and multi-member LLCs, all of whom could be considered beneficial owners, and therefore would need to be identified in the beneficial ownership report and filing, along with their identifying information.

Changes to the owners or controlling members of a business, or their identifying information, require updated beneficial ownership information reporting. For example, an updated Beneficial Ownership Report is required when a controlling member is a minor and reaches an age of majority or if a company becomes tax exempt. Additionally, an updated Beneficial Ownership Report is also required if initially reported information is incorrect or if entities amend their formation documents. Businesses have 30 days from the date of the change or amendment to file an updated Beneficial Ownership Report.

Keeping your business compliant is critical to maintaining your good standing status and avoiding penalties, fines, and imprisonment. With Compliance Filings, you’ll satisfy the new beneficial ownership information reporting requirement and additional compliance filing requirements:

• Annual reports: Guided setup and completion of official filings that keep your business' information—including its name, address, managers, and other details—updated with the state. Filing requirements vary by state.
• Personalized alerts: Alerts notifying you of your specific filing requirements and due dates, simplifying business compliance.
• Amendments: File up to two official changes about your business each year with the Secretary of State, such as a new name, address, or ownership.
• Updated Beneficial Ownership Reports: Additional filings for any changes to identifying information.

The Corporate Transparency Act is one of the most important legislations to impact small businesses owners. Its latest requirement—the Beneficial Ownership Information Reporting Rule—is effective Jan. 1, 2024 and mandates that most limited liability companies and corporations must file the beneficial owner report.

Navigating the new law can be confusing and distracting for small business owners who are otherwise focused on running and growing their business. A service like the one provided by Cornerstone Law Offices, P.C. makes it easier for customers to get ahead of the requirement as soon as possible, and comply with the law to avoid criminal and civil penalties, which include imprisonment for up to two years, a fine up to $10,000, and/or a fine up to $500 per day.

With Cornerstone Law Offices, P.C., customers can avoid noncompliance with three easy steps, reducing their risk while saving time and money. Customers start by answering a few simple questions about the individuals who own or control their business so the report is personalized and accurate. Then, a custom report that satisfies the beneficial ownership information reporting requirement is created and filed. Once we file the personalized report with the Financial Crimes Enforcement Network, we’ll provide confirmation of completion.