Author: Mark Guirguis, CPA, CMA

Vice President, Guirguis & Gibbs Inc.

As we approach the conclusion of 2023, businesses, whether fledgling or well-established, will face a new mandate—the Corporate Transparency Act of 2021. This act necessitates compliance with updated beneficial ownership information reporting, to be phased in over 2024 and 2025. Entities subject to this requirement must report specific details about certain owners and officers to FinCEN, the U.S. Treasury Department’s Financial Crimes Enforcement Network.

The data collected by FinCEN aims to combat global issues like money laundering, tax evasion, and human trafficking. Non-compliance with the mandate could lead to civil penalties of $500 per day and criminal penalties of up to $10,000 per day, along with potential imprisonment for up to two years. It’s crucial to understand and maintain compliance. Notably, FinCEN can impose penalties not only on the entity but also on any beneficial owner.

FinCEN estimates that around 32 million entities will need to comply, with millions more newly formed entities reporting annually. While larger companies may be exempt, those subject to reporting must obtain and report personal information on all deemed beneficial owners. Managing this complexity involves continuously updating the personal information of all beneficial owners with FinCEN.

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Who is required to comply? FinCEN defines a reporting company broadly, encompassing domestic and foreign entities registered in states or countries. If in doubt, FinCEN advises reporting. Determining whether a company must report involves understanding what a reporting company is, covering domestic and foreign entities.

Exemptions exist for large operating companies, inactive entities, security dealers, investment companies, SEC-registered entities, and tax-exempt organizations. Additional exemptions can be explored on the FinCEN website: https://www.fincen.gov/beneficial-ownership-information-reporting-rule-fact-sheet

For entities formed in 2024, reporting involves information about the entity’s applicants—those filing or directing the filing. Entities formed before 2024 are exempt from reporting company applicant information.

This comprehensive information is essential to digest, and staying informed about FinCEN’s reporting requirements is paramount. Keep an eye out for Part 2 of this article, coming soon. If confusion persists, don’t hesitate to reach out and schedule an appointment with us.

Guirguis & Gibbs Inc. is located at 27819 Smyth Drive Floor 2. Valencia, CA 91355. Give us a call at (661) 209-3287.

*Mark Guirguis is a Registered Representative of Cetera Financial Specialists LLC, member FINRA/SIPC. Cetera is under separate ownership from any other named entity. For a comprehensive review of your personal situation, always consult your tax and/or legal advisor. Neither Cetera Financial Specialists LLC nor any of its affiliates offer tax or legal services.

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