As discussed in Part II, a “reporting company” does not include a company that falls under one of the 23 exemptions outlined in the Corporate Transparency Act (“CTA”).  In Part III of this CTA series we discuss possible exemptions from who must be included in “beneficial owner” reporting and what information must be reported as well as the possibility of state specific reporting. 

Individual exemptions to beneficial owner reporting

Additional individual exemptions may apply regarding individuals who would otherwise be included in your reporting as a beneficial owner.  They include the following: 

1. A reporting company does not need to report information about a beneficial owner who is a minor child.  If this special rule applies, a reporting company must report the required information about the child’s parent or legal guardian instead of the child.  In such case, a reporting company must indicate that the information relates to a parent or legal guardian of the minor child. 

2. A reporting company does not need to report information about each beneficial owner and company applicant if the reporting company was formed under the laws of a foreign country and would be a reporting company if not for the “pooled investment vehicle exemption.”  If this special rule applies, a reporting company must report one individual who exercises substantial control over the company, but a reporting company need not report any company applicants.  In addition, if more than one individual exercises substantial control over the company, the reporting company must report information about the individual who has the “greatest authority” over the strategic management of the company.

3. A reporting company does not need to report on an individual acting as a nominee, intermediary, custodian, or agent on behalf of another individual. 

4. A reporting company does not need to report on an individual whose only interest in a reporting company is a future interest through a right of inheritance.

5. A reporting company does not need to report on an individual that is a creditor of a reporting company.

What beneficial owner information is required?

As discussed in Part I, information on beneficial owners is reported to the United States Treasury’s Financial Crimes Enforcement Network (“FinCEN”) through beneficial ownership information (“BOI Reports”).  A BOI Report must include the following information: (1) a reporting company’s full legal name and any alternative names through which it engages in business; (2) a reporting company’s current U.S. business street address or primary location; (3) a reporting company’s jurisdiction of formation/registration; and (4) a reporting company’s Taxpayer Identification Number (“TIN”) or, in the case of a foreign reporting company that has not been issued at TIN, a TIN issued by a foreign jurisdiction and the name of the foreign jurisdiction. 

Additionally, a BOI Report must include the following information for beneficial owners and, if applicable, company applicants: (1) their full legal name; (2) their date of birth; (3) their current residential address or, in the case of a company applicant, the applicant’s current business street address; (4) their unique identifying number from a valid U.S. passport, valid U.S. identification document, or valid U.S. driver’s license or, if an individual does not possess any of these documents, a valid foreign passport; and (5) a scanned copy of the document from which the unique identifying number was obtained.

What is a FinCEN identifier and how is it used?

If an individual is a beneficial owner or applicant to multiple reporting companies, he/she can apply for a “FinCEN identifier.”  A FinCEN  identifier is a unique identifying number that FinCEN will issue to an individual or reporting company upon request; however, FinCEN will not issue a FinCEN identifier until the individual or reporting company provides certain information to FinCEN.  Specifically, if an individual decides to file his or her personal information to FinCEN directly, the individual must first apply for a FinCEN identifier.  The application for a FinCEN identifier must include the same personal information and valid identification document that reporting companies submit about beneficial owners and company applicants in the BOI Report.  Once a beneficial owner or company applicant has obtained a FinCEN identifier, reporting companies may report the FinCEN identifier in place of the otherwise required personal information about the individual in the BOI Report.  

States are adopting their own version of the CTA.

On December 22, 2023, the governor of New York signed into law the New York LLC Transparency Act (“New York Act”).  The reporting requirements of the New York Act will become effective on December 21, 2024.  Although modeled after the federal CTA, the New York Act only applies to limited liability companies that are formed or authorized to do business in the state of New York.  This law will require all limited liability companies that satisfy the definition of a “reporting company” under the CTA to disclose beneficial owner information to the New York Department of State.  Important to note, if a limited liability company qualifies for exemption under the CTA, it is also exempt from the disclosure requirements of the New York Act.  

Other differences between the New York Act and the federal CTA include the following:  (1) no valid identification document is required to be filed with the disclosure; and (2) no disclosure of identifying information related to a company applicant is required.  The timing requirement of the initial report is also different.  For reporting limited liability companies formed or registered to do business in New York on or before December 21, 2024, an initial disclosure must be filed no later than January 1, 2025.  For a reporting limited liability company formed or registered to do business in New York after December 21, 2024, the initial disclosure is due with the filing of the articles of organization or application for authority.  An updated/corrected disclosure must be filed within 90 days of any change to the information disclosed by a reporting limited liability company.  If a reporting limited liability company fails to timely file its disclosure for a period exceeding 30 days, the account will be shown as “past due” or “delinquent,” and a civil penalty of $250 may be accessed.  

Other state level regulations

In addition to New York, other states are in the process of adopting their own version of the CTA; however, New York is the only state to date that has codified its own state law on corporate transparency.  Undoubtedly, more states will soon follow.  This growing trend adds yet another level of complexity to navigating both federal and state regulatory laws.  As a result, companies should adopt a “risk management” approach and take a proactive and preventative stance to ensure compliance with the CTA and any applicable state corporate transparency law that may apply in the future.   The consequence or impact of noncompliance can result in high penalties and possible imprisonment of senior officers. Thus, it is imperative that reporting companies create a system whereby (1) the required information is readily available prior to the time the initial BOI Report is due, (2) the BOI Report is accurate and timely filed, and (3) the BOI Report is updated regularly to ensure compliance as company information changes.  The lawyers at Jordon Voytek will continue to monitor the development of this new area of law and are available to help your company navigate the complexities of the CTA and any future state laws addressing corporate transparency so that your entities can be in compliance with CTA and other applicable laws and regulations.  Jacquelyn Jordon Core and Michael T. Voytek are Founding Partners at Jordon Voytek. Jacquelyn and Michael focus their practice on mergers and acquisitions, and corporate structuring and restructuring, as well as general corporate advice and assistance.  Sandy Wilson is Of Counsel to Jordon Voytek.  She focuses her practice on labor and employment law and counseling.  They are available to assist businesses of all sizes with general counsel services, meeting their day-to-day legal needs. To contact them please contact Jacquelyn directly at Jacquelyn@JordonVoytek.com, or by phone at 304.777.0790, or contact Michael directly at Michael@JordonVoytek.com, or by phone at 203.360.6232, or contact Sandy directly at Sandy@JordonVoytek.com, or by phone at 304.276.1292.