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Corporate Transparency Act Requirement for LLCs, FLPs and More

The Corporate Transparency Act went into effect January 1, 2024 which was enacted by Congress in January 2021 as part of the National Defense Authorization Act.

The goal of the act is to prevent and combat money laundering, terrorism financing, corruption and tax fraud.

Who is impacted: More than 32 million existing business entities, including: LLCs, FLPs, and S-Corps. Family farm LLCs or rental properties may even be required to file. In short, If you exercise substantial control over or own more than 25% of an entity grossing less than $5 million per year and employing less than 20 individuals, then you will most likely need to file.

Who may be exempt: There is a short exemption list on the FinCen website at https://fincen.gov/boi-faqs#C_2. Most exemptions are companies in the finance industry. You can also utilize the Beneficial Ownership Exemptions Checker Tool on the FinCen website at THIS LINK.

What Needs to Be Done: A Beneficial Ownership Information (BOI) form is required to be filed with the Financial Crimes and Enforcement Network (FinCen).

What is reported: Owners’ personal information and information of those who exercise control of the entity.

Where to file: Online at https://fincen.gov/boi

When does the BOI need to be filed: No later than December 31, 2024 for all existing LLCs or within 30 days for newly formed LLCs.

Penalties: Failure to file the form by the deadline will result in up to $500/day per occurrence. It is not clear whether there is a maximum allowable penalty.

Who specifically is required to file is still being determined. Therefore, the best course is to reach out to the attorney that set up the entity to determine whether your entity is required to file.

Chris Allen, CFP® is a wealth advisor and the Director of Financial Planning at Total Wealth Planning, a fee-only fiduciary financial planning firm in Cincinnati (Blue Ash), Ohio. Chris assists clients in creating a sound financial future while serving on the Firm’s Investment Policy Committee and technical financial planning team. Prior to joining the Firm in 2015, Chris worked as a Certified Financial Counselor with a non-profit financial counseling organization, where he consulted with numerous families and helped establish sustainable spending plans. Chris can be reached at callen@twpteam.com.

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