As of Jan. 1, 2024, many companies are required to report beneficial ownership information to the U.S. government’s Financial Crimes Enforcement Network (FinCEN) as mandated by the Corporate Transparency Act (CTA). You may be surprised by what entities qualify as a company and what individuals qualify as a beneficial owner.
Reporting Companies
According to the Small Entity Compliance Guide (fincen.gov/boi/small-entity-compliance-guide), a “reporting company” is any entity that does not qualify for an exemption. A reporting company is either a “domestic reporting company” or a “foreign reporting company.” The CTA exempts 23 specific types of entities from the reporting requirements, but as owners of car dealerships with related entities, many of those entities will not meet the exemption requirements. Think about reinsurance companies and LLCs that own the dealership real estate.
Beneficial Owners
Once you determine the reporting companies, the next step is determining the beneficial owners. Refer to the Small Entity Compliance Guide for more information, but know that a beneficial owner is defined as any individual who, directly or indirectly, exercises substantial control over the reporting company OR owns or controls at least 25% of the ownership interests of the reporting company. Senior officers such as CEOs and CFOs are beneficial owners.
Information to Report
Reporting companies will report the following:
- Full legal name and any DBAs
- U.S. physical address where the company conducts business
- State, Tribal or foreign jurisdiction of formation
- Taxpayer Identification Number (TIN) or foreign equivalent
Submit the following for beneficial owners:
- Full legal name
- Date of birth
- Residential address
- Government-issued photo ID details
- Image of the ID
Filing Deadlines and Penalties for Non‑Compliance
Reporting entities formed before Jan. 1, 2024, have until Jan. 1, 2025, to file. Entities formed on or after Jan. 1, 2024, have 90 days from the company’s creation or registration to file.
Willful non-compliance may result in civil penalties of up to $500 for each day that the violation continues or criminal penalties, including imprisonment for up to two years and/or a fine of up to $10,000.
Conclusion
Start preparing now to comply with the Corporate Transparency Act. Read the Small Entity Compliance Guide and consult with your accountant or attorney if you need assistance.
Tasha Sinclair, CPA/ABV is a principal of Tetrick & Bartlett, PLLC and has been providing accounting, tax, valuation and consulting services to automobile dealers since 2002. Tetrick & Bartlett, PLLC currently serves over 50 dealers in West Virginia, Virginia, Ohio and Pennsylvania and is a member of the AutoCPA Group, a nationwide organization of CPA firms specializing in services to automobile dealers. Tasha can be reached at tsinclair@tb.cpa or (304) 624-5564.
