November 2, 2024 – The deadline to file federal paperwork for many small firearms companies is fast approaching. If your company has 20 or fewer employees with annual gross sales or receipts of less than $5 million you are likely required to act before the end of 2024.
Under the federal Corporate Transparency Act (“CTA”), the deadline for “reporting companies” to file their initial Beneficial Ownership Information report (“BOI”) with the Financial Crimes Enforcement Network (“FinCEN”), a division of the U.S. Treasury, is approaching. The CTA has been in effect since January 1, 2024, imposing significant reporting obligations for millions of privately held business entities. Reporting companies created in 2024 already have an obligation to file a BOI. However, Companies in existence before January 1, 2024, must file the BOI by December 31, 2024. Below is a summary of the CTA’s key requirements.
What is Considered a Reporting Company?
Reporting Companies include any corporation, limited liability company, or other similar entity created by filing documentation with the secretary of state or similar office of any U.S. state or territory, or formed under the laws of a foreign country and registered to do business in the U.S. The CTA reporting obligations will therefore cover most business entities unless they fall within one of 23 narrow exceptions. To help determine whether your company falls within one of these exceptions, you may find the following link helpful – https://www.fincen.gov/boi-faqs. In addition, FinCEN published a Guide to help small businesses determine if they must file and how to do it. In general, if your firearm related business has less than 20 full-time employees and your gross yearly receipts or sales are less than $5,000,000, you are likely required to file this form. Larger companies are not required to file so long as their tax filings prove they are exempt.
Who is Considered a Beneficial Owner?
The main purpose of the CTA is to obtain “beneficial ownership” information. A beneficial owner includes any individual who, directly or indirectly, either (1) owns at least 25% of the ownership interests of the Reporting Company, or (2) exercises substantial control over the Reporting Company. An individual may have substantial control if they are a senior officer, has authority to appoint or remove certain officers or directors, or is considered an “important decision-maker” over the Reporting Company.
What Must be Reported?
A Reporting Company must report its legal name, any tradename(s), principal place of business, jurisdiction of formation or registration, and tax identification number. Reporting Companies must report each beneficial owners’ name, date of birth, residential address, and an identifying number from an acceptable identification document such as a U.S. driver’s license or passport.
Notably, instead of including personal identifying information of beneficial owners and company applicants, a reporting company can include their “FinCEN identifiers” – unique numbers FinCEN issues upon request. Adequate time must be allocated for outreach to third-party beneficial owners, such as investors, managers and other decision-makers, to collect information for timely filing.
Penalties For Failure to File
A person who willfully fails to report beneficial ownership information to FinCEN may be subject to civil penalties of up to $500 each day the violation continues. Said person may also be subject to criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Both individuals and corporate entities can be held liable for willful violations.
In sum, many local firearms dealers and small businesses will be required to file a BOI with FinCEN by December 31, 2024. The time to act is now.
Renzulli Law Firm is here to help you determine if your company is obligated to file and complete the required documentation. If you have any questions about the reporting requirement or upcoming deadline, please contact John F. Renzulli or Christopher Renzulli.