Corporate Transparency Act
NEW DISCLOSURE FOR LLC, CORPORATIONS AND FOREIGN ENTITIES DOING BUSINESS IN PUERTO RICO
RE: Report companies need to file to comply with the Corporate Transparency Act.
I. SCOPE
Given the fact that the Corporate Transparency Act (CTA) will require corporations and limited liability companies to file a new report as of January 1, 2024, for the purpose of increasing national security as part of the National Defense Authorization Act, here at Lugo Mender Group, LLC, we want to provide our clients with an easy step by step guide on how to comply with this new requisite.
II. CTA REQUIREMENTS
CTA will require a ‘Reporting Company’ to file a report providing its basic information and information about the ‘Owner/Beneficiaries’ and from whoever registered the company at a Department of State of any state or territory (Department of State).
a. Filing. The report will be filed electronically at the Financial Crimes Enforcement Network (FinCen) through their Beneficial Ownership Information Reporting (BOI Report/Report). This information will not be public but will be available to state and federal agencies.
b. Contents of the report. The Report will contain information about each ‘Reporting Company’, of its ‘Owners/Beneficiaries’, and its ‘Applicant’. The report will contain the following information
i. Reporting Company
1. Full legal name, trade name, or DBA
2. Address
3. Place of incorporation
4. Employer Identification Number (EIN) or FinCen’s ‘Identifier’, or Taxpayer Identification Number (TIN) or the foreign identification number (if it does not have a TIN).
5. *If foreign, the foreign jurisdiction of formation
ii. Owner’s or ‘Beneficiaries’
1. Legal name
2. Birth Date
3. Residential Address
4. Government issued identification
iii. Applicants
1. Legal name
2. Birth Date
3. Commercial or Residential Adress
4. Government issued identification (Id) *
*An image of the id must be supplied that the number is from.
c. Due Dates.
i. Existing Companies or created before January 1, 2024: these entities will be required to file the Report within one (1) year. In other words, these companies must have filed the Report on or before January 1, 2025.
ii. Companies created on or after January 1, 2024: these companies will have to file their Report within (30) days from the date of receiving actual or public notice that the creation or registration of the company is effective.
iii. Modifications, corrections or changes in the information: companies will have to make modifications, corrections or changes in their Report within (30) days after a change occurs, become aware or has a reason to know of an inaccuracy.
III. WHO IS REQUIRED TO REPORT?
Under CTA a Reporting Company can be a corporation, a limited liability company, or any other entity that is registered at the Department of State, it also includes a foreign entity that is registered at the Department of State (Reporting Company/Entity).
*For CTA purposes, the Commonwealth of Puerto Rico is considered a state.
IV. WHO IS AN ‘OWNER/BENEFICIARY’?
Any person who can exercise any direct or indirect ‘Substantial Control’ over a Reporting Company
a. ‘SUBSTANTIAL CONTROL’
A person has Substantial Control over an entity if such person:
1. Has significant control over the operations of the Reporting Company
2. May contract or forego an employee of the Reporting Company
3. Possess a significant role in the decision making of the Reporting Company
*Any person who owns not less than (25%) or more of the participation of the Entity will be assumed to be the owner/beneficiary of such entity.
V. WHO IS AN APPLICANT?
The person that registered the Reporting Company at the Department of State is an Applicant.
VI. ‘IDENTIFIER’
CTA provides Beneficiaries or Applicants to register in advance at FinCen to obtain an identification number which can be used instead of providing the information required every time the Report has to be filed. In the case of an Applicant, if the Applicant obtains an Identifier, he shall no longer need to provide the personal information required from him each time he files the Report for any of his clients.
VII. EXEMPTED ENTITY
Large Companies: (i) possess more than 20 employees on its payroll, (ii) files federal income tax report, (iii) where it reports more than $5 million on gross income, and (iv) has physical presence in the United States.
*If a company in Puerto Rico doesn’t file federal income tax report, it will not comply with these requirements for it to be considered an Exempted Entity.
Other exempted entities are, but not limited to: public companies; non-foreign-owned shell companies; financial institutions (e.g., banks, credit unions, brokers, dealers, and exchange and clearing agencies); investment companies; insurance companies operating within the US; public utility companies; accounting firms; pooled investment vehicles; nonprofit and political organizations; amongst others.
VIII. PENALTIES
Any Reporting Company that doesn’t file the Report or provides fraudulent information will be exposed to a daily ($500.00) penalty, a ($10,000.00) penalty, or may even face up to (2) years of imprisonment for violating the CTA.
IX. ADDITIONAL INFORMATION
For additional information you can refer to https://www.fincen.gov/boi, or contact the FinCEN Regulatory Support Section at 1–800–767–2825 or electronically at frc@fincen.gov.