Dear Clients and Friends,

As part of ongoing efforts to promote transparency and curb financial crimes, the Corporate Transparency Act (CTA) was enacted on January 1, 2021. This legislation represents the most significant update to anti-money laundering rules since the U.S. Patriot Act. The CTA focuses on combating money laundering, terrorism financing, and other illegal activities by requiring certain entities (mainly small and medium-sized businesses) to report their "beneficial ownership" information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury Department.

The information FinCEN collects will be protected and may only be disclosed to authorized government authorities and financial institutions in specific situations. This is a major regulatory shift, and Oakhaven Advisors is reaching out to ensure you are aware of the new requirements and understand the necessary steps to comply.

What Entities Must Report?

Entities required to comply with the CTA (“Reporting Companies”) include corporations, limited liability companies (LLCs), and similar entities that are created by filing with a Secretary of State or equivalent official. Foreign companies that register to do business in the U.S. are also subject to these requirements.

Are There Exemptions?

There are 23 categories of exemptions, including publicly traded companies, banks, credit unions, public accounting firms, and tax-exempt organizations. "Large operating entities" may also be exempt if they meet all the following criteria:

• Employ more than 20 people in the U.S.

• Report over $5 million in revenue on the prior year’s tax return

• Maintain an operating presence at a physical U.S. office

  
  

Who is Considered a Beneficial Owner?

The CTA defines a “beneficial owner” as any individual who, directly or indirectly:

• Exercises substantial control over the company, or

• Owns or controls at least 25% of the company’s ownership interests

The definition of “substantial control” under the CTA is broad and includes any senior officer of the company, regardless of ownership interest. It may be necessary to seek legal guidance to accurately identify all beneficial owners within your organization.

Reporting Deadlines

The filing deadlines vary based on the formation date of the entity:

• New entities (formed after 12/31/2023) must file within 90 days of formation.

• Existing entities (formed before 1/1/2024) must file by 1/1/2025.

• Changes to previously reported information must be updated within 30 days.

What Information Must Be Reported?

The required information includes the full legal name of the company, trade names (if applicable), business address, jurisdiction of formation, and IRS Taxpayer Identification Number (TIN). For beneficial owners and, in the case of newly formed entities, company applicants, the following details must be reported: full name, birthdate, address, and a unique identification number from an official ID (e.g., driver’s license or passport) along with an image of that document.

How to Prepare for CTA Compliance

Now is the time to assess your company’s compliance with the CTA. Key considerations include:

• Does your company fall under the CTA or qualify for an exemption?

• If required to report, who within your organization qualifies as a beneficial owner based on the CTA’s broad definition?

• How will your company monitor changes to its beneficial owners and ensure timely reporting to FinCEN?

• What internal processes and agreements need updating to ensure compliance with ongoing reporting obligations?

Penalties for Non-Compliance

Non-compliance with the CTA's Beneficial Ownership Information (BOI) reporting requirements can result in significant penalties, including fines of $500 per day (adjusted for inflation), up to $10,000, and imprisonment for up to two years.

How Oakhaven Advisors Can Help

While we are not legal advisors and cannot provide legal determinations regarding your entity’s compliance or exemptions under the CTA, we are available to assist you in preparing and filing the initial BOI report. Our team is here to help you navigate this complex process. We encourage you to provide us with the necessary information by Monday December 2, 2024, to ensure timely filing.

Our fee for the initial BOI filing is $350 and may vary depending on the complexity of the entity and its ownership structure. If you would prefer to handle your own reporting, it can be done here: https://www.fincen.gov/boi

Please don’t hesitate to reach out with any questions, or if you need assistance determining your compliance obligations under the CTA.