Preparing Florida Businesses for the Corporate Transparency Act (CTA)

Objective:

• To prepare for the upcoming new reporting requirements created by the Corporate Transparency Act (CTA).
  
  
• A beneficial owner information (BOI) Report is required for all entities doing business since Jan 1, 2020.

Entities:

• Limited Liability Companies (LLCs)

• Corporations

• Non-Profits

Additional Information:

Most of our clients will need to file a beneficial ownership information (BOI) report. There are 23 exemptions with highly specific criteria, which can be found in FinCEN’s Small Entity Compliance Guide. See Chapter 1.2 for a table and checklist for these exemptions. Companies need to carefully review the conditions involved to confirm beyond a shadow of a doubt that they are, in fact, exempt.

The BOI reporting form will be available on FinCEN’s website starting January 1, 2024. Companies formed on or before December 31, 2023, will have until December 31, 2024 to file their initial report. Those formed on or before after January 1, 2024, however, will have either 30 days to file their initial report depending on the business’s specific date of formation.

For more help, check out our DIY BOI Filing Guide available through our Knowledge Base.

Procedure:

Clearly defining your company’s ownership and operators in its corporate documents is more important than ever before. Ambiguous or missing information has always been a potential threat to business owners, but once the CTA comes into effect, heavy fines and even jail time will be on the table, too. These issues are more common than you might think – it’s something that our corporate law firm encounters on a regular basis. Be sure to get everything in order well in advance so that the filing process is as smooth and stress-free as possible.

As far as corporate housekeeping goes, the following actions can help your business prepare for the CTA:

• Have an operating agreement or shareholder agreement in place if your business has multiple owners. This helps make sure that everyone’s ownership and control in the company is properly documented. Update it regularly and consider having it reviewed by a Florida corporate attorney.

• Add BOI provisions to existing documents that require each owner to comply with the CTA’s reporting requirements.

In addition to reviewing Chapter 2.3 of FinCEN’s Small Entity Compliance Guide, consider the following when determining who qualifies as a beneficial owner under the CTA:

• A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests.

• For example, an LLC’s members, managers, president, secretary, treasurer, and director could all be considered to exercise substantial control over a reporting company.

You’ll need to provide the following information about each of your company’s beneficial owners:

• Name,

• Date of birth,

• Residential address, and

• An identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction.

For help with identifying beneficial owners, review the checklist provided in Chapter 4.1 of FinCEN’s Small Entity Compliance Guide.

Every reporting company will need to file at least once – this will be your business’s “initial report.” You’ll need to file again if your company undergoes any significant changes. This will also be true if there are changes to the company’s beneficial owners. There is no annual filing requirement.

When filing your company’s initial BOI report, you’ll need to upload personally identifiable information (PII) along with copies of the relevant identification documents. Because of this, it’s essential that you vet any third parties that will be filing on your company’s behalf. After all, you don’t want them selling any private information.

BOI reports will be filed through a secured portal on FinCEN’s website. This portal will be open to the public beginning on January 1, 2024.

Unfortunately, scammers often use the confusion surrounding new laws as cover when targeting small businesses. These schemes include everything from mail rackets that use “official” looking letters to more complex operations (that target specific individuals). As we run out the clock on 2023, keep in mind that FinCEN has not released an official form for filing BOI information under the CTA’s requirements. This is one potential red flag to be aware of when looking out for scammers. Be cautious these first few months while everything is finalized and remember that you can always trust our guidance if you’re not sure.

The CTA sets out strict penalties for noncompliance. Violations are subject to civil penalties of up to $500 for each day that the report remains unfiled. Criminal penalties can be involved, too, and include up to two years of imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a BOI report, willfully filing false information, or willfully failing to correct or update previous reports.