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If A Business, Farm, or Ranch Is Part of Your Estate Plan, The Federal Government Likely Wants More Information About You

The requirements of the Corporate Transparency Act are not difficult, but must not be ignored.

What is the Corporate Transparency Act?

The Corporate Transparency Act is the federal government’s most recent effort to stop the bad guys from hiding behind a corporation or other entity to carry on nefarious activities. The solution, Congress has decided, is to require the people behind business entities to identify themselves to an agency called the Financial Crimes Enforcement Network (otherwise known as “FinCEN). This is the arm of the federal government that prosecutes financial crimes and money laundering.

Below is additional general information about the Corporate Transparency Act. This information is not intended as legal advise for specific circumstances.

Do I Need to File For My Business Entity?

For Idaho, an entity formed by filing with the Idaho secretary of state is a Reporting Company, meaning it is an entity that must be reported to FinCEN. This includes corporations, limited liability companies, limited partnerships, limited liability limited partnerships, and possibly even general partnerships.

Significantly, there is no exception for small companies or even for companies with no employees. However, sole proprietors are not required to submit a report.

There are exceptions to this requirement but they are limited and usually apply to entities that must already submit information to the federal government. The most common example is a tax-exempt entity. These are entities formed under a specific provision of federal law (i.e. Section 501(c)). A nonprofit entity is not necessarily tax exempt. Thus, it is possible that a nonprofit entity must still comply with the Corporate Transparency Act.

Note that an entity which is not engaged in active business may not need to comply but there are other criteria which must also be met for an inactive entity to be exempt.

Why Am I Required to Provide This Information to the Government?

Often, the name of a business entity will be different than the actual names of the people behind the business. Even if the business name includes the name of an owner, as the business develops and its reputation grows, those who take over the business may not share that name.

Unfortunately, the ability to do business under a different name is also exploited by the bad guys. If they start or take over an entity under a different name, it is easier for them and their criminal activity to avoid detection. To fight this, the Corporate Transparency Act requires most business
entities to provide the government with information about the key people behind that entity.

Although the government intrusion into a business owner’s privacy is concerning, the obligation to provide information is not optional. A silver lining, if it is one, is that the reporting process is relatively straightforward. FinCEN does not charge a fee to comply. There is also no need to hire an attorney to comply. However, for those who would like assistance, our office can assist for a fee of $350. Just send a request to info@wrightlawidaho.com with “CTA” or “Corporate Transparency Act” in the subject line.

How Do I Submit This Information?

Reports are to be submitted online at www.FinCEN.gov. Additional information, including a guide for small business owners, can also be found on this website. Reporting must only be done once unless there is a need to update reported information.

Be aware that FinCEN is already warning about scams to collect your information, which will otherwise be kept private. FinCEN will not send you an unsolicited request. If you receive an unsolicited email, perhaps titled “Important Compliance Notice,” do NOT click on a link or scan the QR code!

What Information Must I Submit?

In a nutshell, companies that are required to file a report (not surprisingly called “Reporting Companies”) must provide information about “Beneficial Owners” of the company. A “Beneficial Owner” is the government’s term for a person who is an owner or who has substantial control – directly or indirectly – over the business. The information submitted will not be available to the public.

In addition to providing information about “Beneficial Owners,” “Applicants” for the company – generally the individual who files the formation document with state authorities – must also be identified.

The Reporting Company must provide its name and any alternative (DBA) names, the address of its principal place of business, the state of formation, and its taxpayer identification number or what is called a FinCEN identifier. Every Beneficial Owner or Company Applicant must furnish a full legal name, date of birth, residential address, and an identification number from a driver’s license, passport, or other state-issued identification, along with a copy of that document.

When Must I Submit This Information?

Reporting companies formed before January 1, 2024, have until the end of 2024 to provide the required information. Reporting companies formed in 2024 have 90 days from formation to report. Reporting companies formed on or after January 1, 2025, will have 30 days to report.

For those who create, own, or control a business entity, the obligations of the Corporate Transparency Act are now a reality that cannot be ignored. As with any law, compliance is important to avoid or minimize potential future problems.

For more information, please review the Financial Crimes Enforcement Network (FinCEN) website.

© 2024 Steven J Wright

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