Category: CTA Basics

When it comes to completing Beneficial Ownership Information (BOI) reports for entities formed on or after January 1, 2024, a common oversight is the inclusion of the BOI company applicant. In this blog, we’ll delve into why reporting the company applicant is essential, how to ensure it’s not overlooked, and the role of legal and financial professionals in streamlining this task.

Understanding the Role of the BOI Company Applicant

Under the Corporate Transparency Act (CTA), a company applicant is an individual that is responsible for filing and managing the filings of the necessary documentation to establish a new business entity. 

This role can often be filled by a lawyer, accountant, or another professional advisor who assists in the formation process. Business owners may also be company applicants.

Why is the BOI Company Applicant Important?

1. Regulatory Compliance: Including the company applicant in the BOI report ensures full compliance with the Corporate Transparency Act (CTA). This act mandates that all entities disclose their beneficial owners and the individuals who aided in forming the company. Proper reporting helps avoid penalties and maintains transparency.
2. Accurate Representation: The company applicant’s inclusion may provide a complete picture of the entity after its formation. It identifies the person or entity who managed the creation process, which is important to the relevant regulatory authorities.
3. Accountability: The Financial Crimes Enforcement Network (FinCEN), the regulatory body collecting BOI reports, may want to collect the identity of the company applicants if any questions or issues arise regarding the business’s purpose of formation.

Common Oversights (and How to Avoid Them)

Despite the importance of reporting the company applicant, it’s a step that is easily overlooked. This oversight can lead to incomplete reports and potential non-compliance. Here’s how to ensure this step is not missed:

1. Standardized Processes: Implement a standardized procedure for new entity creation that includes a checklist for all required filings – including that under the CTA. Ensure that recording the individuals who may be company applicants is a step in your process.
2. Clear Communication: Legal and financial professionals should clearly communicate the need to include themselves as a company applicant when advising clients to file their BOI reports for their new entity. Make sure to ask your professional who from their organization needs to be on the report.
3. Double-Check Submissions: Before finalizing and submitting the BOI report, double-check that all required information, including the company applicant’s details, is included. Implementing a review process can help catch any missed details.

The Role of Professionals in Ensuring Accurate Reporting

Lawyers, accountants, and other professionals play a pivotal role in ensuring that all aspects of the business formation and compliance process are handled correctly. Here’s how they can assist:

1. Guidance and Reminders: Professionals should provide clients with clear guidance on their reporting obligations, including the need to include the company applicant. They can also remind clients of these requirements as part of their service.
2. Standard Procedures: Incorporate the requirement to report the company applicant into standard new entity creation procedures. This helps ensure that no steps are missed and that clients are aware of their responsibilities.
3. Regular Updates: Keep clients informed about any changes in reporting requirements or best practices. Regular updates help maintain compliance and reduce the risk of overlooking critical steps.

Accurate and complete reporting of the company applicant in Beneficial Ownership Information reports is crucial for regulatory compliance and transparency. By understanding the importance of this role and implementing measures to ensure it is not overlooked, businesses and professionals can maintain adherence to the Corporate Transparency Act and avoid potential issues.

To ensure you’re meeting all compliance requirements, consider consulting with a professional who can guide you through the process and help integrate these steps into your routine practices. Properly reporting the company applicant is not just a regulatory requirement—it’s a key element of maintaining transparent and accountable business operations.

The Corporate Transparency Act (CTA) introduces new requirements for beneficial ownership information (BOI) reporting, affecting a wide range of businesses. As we move into Q3, CPAs, attorneys, and business owners must wrestle with the question: is early BOI filing worth it? We would answer with an emphatic YES!

Uncover the benefits of early BOI filing below.

The Fourth Quarter Crunch

For CPAs and attorneys, Q4 is a whirlwind of activity. Year-end financial statements, tax planning, and client consultations coalesce into a hectic schedule, making it difficult to accommodate additional requests. Similarly, business owners face the pressures of retail season, holiday preparations, year-end inventory, budgeting, and strategic planning. The added burden of last-minute BOI reporting can lead to missed deadlines and potential compliance issues.

So, Why File Early?

Availability of Professionals:

• CPAs and Attorneys: By initiating the BOI reporting process in the third quarter, clients can secure more dedicated time and attention from their CPAs and attorneys. Early filing ensures that professionals can provide comprehensive support without the time constraints imposed by fourth-quarter demands.
• Business Owners: With the hectic nature of Q4, as well as potential unexpected filing complexities, business owners can benefit from starting the filing process earlier, ensuring they are not caught off guard by deadlines and can focus on their core business activities during peak season.

Avoiding the Year-End Rush:

• Reduced Stress: The fourth quarter is notorious for its intense workload. By filing early, both professionals and business owners can avoid the last-minute rush, reducing stress and allowing for a more thorough and accurate reporting process.
• Proactive Compliance: Early filing demonstrates a proactive approach to compliance, which can enhance a business’s reputation and ensure they remain on the right side of regulatory requirements.

Planning and Accuracy:

• Thorough Preparation: Filing early provides ample time to gather necessary documentation, ensure accuracy in reporting, and pursue professional help, if desired. Proactive preparation can prevent errors that might occur under the pressure of a tight deadline.
• Client Communication: Early filing allows for better communication between professionals and their clients, ensuring that all parties are informed and any issues can be resolved promptly.

The Role of Technology in Early BOI Filing

Utilizing technology can streamline the early BOI filing process. At Secure Compliance, our software solutions are designed to help CPAs, attorneys, and business owners manage their BOI reporting efficiently. Our tools offer:

• Automated Reminders: Stay ahead of deadlines with automated notifications.
• Centralized Documentation: Keep all necessary documents organized and easily accessible.
• Compliance Tracking: Monitor compliance status and ensure all requirements are met.

Take Action Now!

As we approach Q4, now is the time to plan ahead. By filing early, CPAs, attorneys, and business owners can move toward a smoother reporting process. Don’t wait until the last minute – take proactive steps now to secure your compliance and avoid the year-end rush.

Questions about how BOI filing software could help you? Reach out to Secure Compliance today to learn more about how our innovative solutions can support your BOI reporting needs and help you stay ahead of the curve.

FinCEN Beneficial Ownership Reporting Requirements – The Basics

The Financial Crimes Enforcement Network (FinCEN) Beneficial Ownership Information (BOI) reporting requirements represent a significant step towards increasing transparency and combating illicit activities in the financial system. With the implementation of the Corporate Transparency Act (CTA), millions of entities in the U.S. are now required to disclose their beneficial ownership information. This guide provides a detailed overview of what is included in a beneficial ownership report under FinCEN rules and how entities can ensure compliance.

What is Beneficial Ownership?

Beneficial ownership refers to individuals who ultimately own or control a company, even if the ownership or control is exercised indirectly through other entities or arrangements. Under FinCEN rules, a beneficial owner is any individual who meets one or more of the following criteria:

1. Ownership: Having direct or indirect ownership of or control over at least 25% of the entity’s ownership interests.
2. Control: Having substantial control over the entity, this can apply to executives, senior managers, or anybody with the power to decide on important matters for the business.

Key Requirements of BOI Reporting

Identification of Beneficial Owners

Entities must identify and report information about each beneficial owner, including:

1. full legal name
2. date of birth
3. residential address
4. a unique identifying number from an acceptable identification document (e.g., passport, driver’s license)
5. an image of the identification document

Reporting Timeline

By January 1, 2025, entities in existence before January 1, 2024, must submit their first BOI report. The entities formed during 2024 must report within 90 days of formation. After 2024, newly created entities are required to file within 30 days if creation. Not only does an initial report have to be filed, but all information must be kept up to date. Meaning, if any information previously reported changes, it must be reported within 30 days after the modification.

Entities Subject to Reporting

BOI reporting applies to the majority of entities, including corporations, limited liability companies, and other businesses that are created in the United States or registered to do business here. Nevertheless, large operating companies, highly regulated entities, and dormant entities are among the 23 categories of entities that are exempt from reporting.

Common Challenges in BOI Reporting

1. Identifying Beneficial Owners: When ownership is dispersed over several levels of an entity, it may be difficult to identify all beneficial owners. Not only are beneficial owners those with ownership interests, but they are also those with substantial control, regardless of their financial interests in the entity.
2. Data Accuracy and Verification: It can be challenging to ensure that the information presented is accurate and to confirm the identity of the beneficial owners. It is the reporting company’s responsibility to ensure that reported information is correct. Tracking down the required information from all beneficial owners may require follow up mechanisms, adding time to the compliance process.
3. Maintaining Compliance: Reporting may not end with the filing of the first BOI report. Information must stay up to date with FinCEN, which means that internal processes that foster prompt reporting must be considered as beneficial ownership shifts within an entity. Any changes to BOI (example: beneficial owner moving to a new address, company hiring a new CEO, etc.) must be reported within 30 days of the change.

How Secure Compliance Simplifies BOI Reporting

Secure Compliance offers robust solutions to streamline the BOI reporting process, providing entities with what they need to comply with FinCEN requirements efficiently and accurately.

Here’s how our tools can help:

• Automated Data Collection: SecureFILE and SecurePRO automate the collection of beneficial ownership information, reducing the manual effort required and minimizing the risk of errors.
• Simplified Reporting: With user-friendly interfaces and step-by-step guidance, our solutions make it easy to complete and submit BOI reports, even for business owners that aren’t thoroughly versed in the CTA.
• Ongoing Compliance Support: Secure Compliance provides ongoing support to help you stay up to date with any changes in reporting requirements and ensure continuous compliance.

We Are Your Partner in BOI Reporting

Understanding and complying with the FinCEN beneficial ownership reporting requirements is crucial for entities operating in the U.S. By identifying beneficial owners, maintaining accurate records, and staying informed about reporting deadlines, you can avoid penalties and contribute to a more transparent financial system. Secure Compliance is here to assist you every step of the way, offering reliable tools and expert support to simplify your compliance journey.

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What Happens After the Initial BOI Report?

As a business owner, staying ahead of regulatory changes is stressed for maintaining compliance and avoiding penalties.
 
One significant legislative shift that demands your immediate and ongoing attention is the Corporate Transparency Act (CTA). Once you have filed the initial BOI Report for your company, it’s important to realize that CTA reporting is NOT a one-time or even annual requirement.
 
Updates are required as often as information changes about the company or it’s beneficial owners, and it is mandatory to report these within 30 days of any change.
 
Companies must establish processes for managing this component of the new requirement, especially as ownership and control structures shift. Because these changes need to be reported as they occur, now is the time to develop a plan of action for timely filing and to consider the new policies and procedures that come with this responsibility.
 
People are not accustomed to reporting changes in their personal information to the company, such as informing them of a new Driver’s License with a different ID number or a name change after getting married.
 

Which Changes Require Updated Reporting?

Some other changes that will trigger the need for updated reporting include:
 

1. Modifications in Beneficial Owner Information: Changes in legal name, residential address, and ID numbers from a Drivers License or passport.

Changes about the company or it’s structure will also trigger updates, including: 

1. Changes in Company Information: Registering a new trade or doing-business-as name or moving to a new business address.
2. Alterations in Beneficial Ownership: Appointment of new beneficial owners with substantial control, change in ownership structure – especially if it involves someone reaching or surpassing the 25 percent ownership interest threshold – departure or resignation of a beneficial owner, the death of a beneficial owner, or inheritance of ownership interest.

Considering these changes, the reporting will need to be done promptly. However, it involves more than just filing the report. There are a few things you need to consider to ensure your business complies with the CTA and mitigates their risk of non compliance:

Educating Beneficial Owners (BOs)

Beneficial owners must be informed about their reporting obligations and the necessity to notify the company of any changes in their information immediately, as the company only has 30 days to report this update.
 
To facilitate this, beneficial owners need to be made aware of the information they must keep up-to-date with the company. Managers and personnel with substantial control, senior officers, and certain BODs are the types of people at a company that should be informed about these update requirements.
 
It’s also important to inform HR representatives to establish processes for collecting certain information upon hire.
 
Establishing a regular schedule for verifying current information with beneficial owners – depending on the size and structure of your organization, is a sound strategy. 
 
If your lawyer or CPA is responsible for maintaining compliance, they must also be notified when non-client owners have a change in information. This may involve introducing certain owners to your lawyer or CPA to ensure a clear line of communication for these updates. If not, the engaged owner must communicate with the other beneficial owners and then relay the information to the professional.

Human Resources Coordination

If you haven’t yet discussed this with your HR team or those handling employee relations at your company, now is the time to do so. The HR team needs to be thoroughly familiar with the CTA requirements, especially those related to substantial control roles.
 
They must ensure that new hires in positions of substantial control are informed about their reporting obligations during the onboarding process, including the collection of necessary personal information as part of their employment documentation.
 
Beneficial owners are not only the individuals that work at the company but also those who hold at least 25% ownership interests. For example, if your company is owned by someone and their spouse, but the spouse doesn’t work at the company, HR will need to make sure that the spouses information is acquired and maintained.
 
Additionally, make sure that someone on your team is monitoring any updates or changes in the regulations from FinCEN that may require adjustments to internal processes or reporting procedures.
 

Establishing New Policies and Procedures

Creating new standard operating procedures (SOPs) is critical for compliance. Develop clear policies outlining the process for updating required information or even updating their FinCEN IDs. Ensure these policies are easily accessible and understood by all relevant parties. Integrate these policies into your hiring and onboarding processes so new hires are immediately aware of their responsibilities.
 
Ask yourself these questions:
 

• How often will you remind beneficial owners about the need to make updates? Will you need to provide them resources more than once to educate them?
• Will you proactively ask beneficial owners if they had any changes in their information? Who will do this and how often?
• What is the channel for the beneficial owner to inform the designated individual about any changes to their information?
• Who is responsible for submitting the updated BOI Reports?
• Is HR watching for changes in job descriptions or new roles that might give someone substantial control, thus requiring an updated report including that individual as a beneficial owner?
• •  

Since some updates will need to be made through the individuals’ login.gov accounts – if they have a FinCEN ID –  it’s essential to ensure that beneficial owners maintain secure access to their accounts and understand how to promptly update their information. Develop policies to verify that the update was made in their account correctly and on time to ensure the company has met its responsibilities.
 

Responsibility for Filing Updates

Determine who will be responsible for filing updates with FinCEN. Will it be a business owner, CPA, or another designated individual? Clear delegation can prevent lapses in compliance.
 
A major consideration for ensuring personal information gets reported is when individuals obtain a FinCEN Identifier. When an individual gets a FinCEN ID, the company’s ability to file certain updates may be restricted.
 
This is because once an individual has a FinCEN ID and uses it on the BOI Report in place of their required information, they can only update their information through their login.gov account. For instance, an individual should inform the company of a change in their home address, but they will be responsible for reporting that change in their login.gov account.
 
If they hadn’t obtained a FinCEN ID, the change in address would be reported by the company in an updated BOI Report. Companies need to carefully consider this because BOI Reporting is their responsibility to ensure all reported information is accurate. Implementing a system to verify that beneficial owners have actually filed their information with FinCEN might involve collecting proof of submission from the individuals.
 
If you find yourself needing to file many updates during the year or you’re not sure how many you will need, it’s not too late to consider using a software to enhance management even reduce the amount of time it takes for ongoing CTA compliance.
 
Software solutions, like Secure Compliance, are designed to collect, store, and manage personal information securely. This can streamline the process, provide a channel for owners to report their updated information, and ensure that data is easily accessible when needed.  Our software also ensures that personal information remains in our software, not on the company’s servers.  
 
Reporting software can also reduce the number of times you need to reenter information.
 
When using the FinCEN website or some other software, you have to reenter all details of the report, even if the update is just one address of a beneficial owner.
 
For companies with multiple related entities or even for just one entity with continuously changing information, software can store the owners’ information so you don’t have to enter the same person on each report—enter it once and tie it to all desired entities or change the one item of information and file.
 
Secure Compliance subscriptions also offer unlimited updates, so you won’t have to worry about how many updates or corrections you’ll need to file throughout the year.
 
The CTA introduces new complexities for business owners, but with careful planning and the right tools, you can navigate these changes successfully. By establishing clear procedures, leveraging professional assistance, and utilizing technology, your business can stay compliant and avoid the potential pitfalls of this new regulatory landscape.

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The Corporate Transparency Act (CTA) mandates that reporting companies must report their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN) to promote transparency and combat illicit activities. To comply with these regulations, entities must first file an initial BOI Report by their first due date. However, while some companies may very rarely need to file another report, there will be many that will file the different types of BOI reports at various stages. Here, we explain the four types of BOI reports required under the CTA: Initial, Update, Correction, and Newly Exempt Entity.

1. Initial Report

The initial report is the first BOI report that each entity must file by their respective due date. This report sets the foundation for compliance and will be submitted only once. The due dates for filing the initial report are as follows: 

• Entities formed before January 1, 2024 have until January 1, 2025, to file their initial report.
• Entities formed in 2024 have 90 days from the confirmation of formation to file their initial report.
• Entities formed in 2025 and beyond must file their initial report within 30 days of formation.

2. Updated Report

An updated report is required when any previously filed information becomes outdated or incorrect. Entities must file an updated report within 30 days of the change in information. Situations that may trigger the need for an updated report include changes in beneficial ownership, changes in the entity’s address, or changes in the personal details of beneficial owners. Some entities may not file an updated report for years after filing their initial report, others may need to file just after a few months. There is no limit to how many updated BOI Reports can be filed.

3. Corrected Report

A corrected report is necessary when an entity realizes that the information previously filed was inaccurate. This report must be filed within 30 days of discovering the mistake. The corrected report ensures that the BOI database remains accurate and reliable. Common errors that might necessitate a corrected report include typographical errors, incorrect DOBs, incorrect residential addresses, or omitted beneficial owners.

4. Newly Exempt Entity Report

The newly exempt entity report is for entities that have already filed an initial BOI Report but subsequently meet the criteria for an exemption from reporting. This applies to entities that fall into one of the 23 categories of exempt entities outlined by the CTA. Once an entity qualifies for exemption, it has 30 days to file a newly exempt entity report. It is essential to monitor the exemption status continually, as changes in the entity’s status might require re-filing under the CTA.

Maintaining Transparency

Compliance with the Corporate Transparency Act requires entities to understand and accurately file the appropriate BOI reports. The initial report sets the compliance baseline, while updated and corrected reports ensure ongoing accuracy. The newly exempt entity report acknowledges changes in status that affect reporting obligations. By adhering to these requirements and maintaining vigilance over any changes in information or status, entities can ensure compliance and contribute to the broader goals of transparency and integrity in corporate governance.

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In today’s regulatory environment, accurately reporting beneficial ownership under the Corporate Transparency Act (CTA) is crucial for avoiding penalties. One specific area of focus is the role of corporate trustees and how they should be reported as beneficial owners. This article delves into the nuances of how to report a corporate trustee and the conditions under which a corporate trustee can be named instead of individual beneficial owners. Understanding these aspects is essential for ensuring accurate and compliant reporting practices. 

How to Report a Corporate Trustee as a Beneficial Owner

The process for reporting a corporate trustee as a beneficial owner depends on the structure and extent of ownership the trustee holds in the reporting company. Below are the steps you should take to determining the right beneficial owners: 

Determine Ownership Proportion

Calculate the percentage of the reporting company that the corporate trustee indirectly controls through the trust. For example, if a corporate trustee owns 70% of a trust that holds 40% of a reporting company, then it controls 28% of the company, qualifying as a beneficial owner.

Consider the Conditions for Reporting the Name of the Corporate Trustee

The corporate trustee can only be reported by name instead of the individual beneficial owners if: 

• The corporate trustee itself is exempt from reporting requirements.
• The beneficial ownership threshold (25% control) is met solely through the trustee’s ownership interest in the reporting company.
• No individual beneficial owner of the corporate trustee exercises substantial control over the reporting company. The same criteria for substantial control apply as they would for any other beneficial owner.

Consider the Conditions for Reporting the Name and FinCEN ID of the Corporate Trustee

The corporate trustee can only be reported by name and its FinCEN ID instead of the individual beneficial owners if: 

• The corporate trustee itself has filed a BOI Report and has provided their ID to the reporting company.
• The beneficial ownership threshold (25% control) is met solely through the trustee’s ownership interest in the reporting company.
• The corporate trustee and the reporting company have the same beneficial owners.
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Accurately reporting corporate trustees as beneficial owners is a complex yet essential task in today’s regulatory landscape. By understanding and adhering to these guidelines, organizations can ensure they meet compliance requirements and avoid potential penalties.

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