The Corporate Transparency Act: What Farm Operations Need to Know
/This year, farmers may need to add another form to their paperwork. Passed in 2021 and effective as of January 1, 2024, the Corporate Transparency Act (CTA) requires certain businesses to report their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). FinCEN analyzes financial transactions to combat financial crimes. Focusing mostly on small businesses, the CTA aims to prevent money laundering, financial terrorism, and other illicit actions from being conducted through shell companies or business entities. Therefore, small farms and agriculture businesses meeting specific requirements will be required to file BOI reports.
Which Businesses Must Comply?
The Act targets “reporting companies” which include corporations, limited liability companies, and other similar entities that are created in the United States by filing documents with a secretary of state or similar office. This does not include sole proprietorships, general partnerships, and most trusts. Foreign reporting companies are those entities formed under law of a foreign country but registered to do business in the United States. Companies with more than 20 employees and more than $5 million in gross receipts are exempt from filing BOI reports. Consequently, non-exempt, small farms and agriculture businesses registered with the state will be required to disclose personal information about their beneficial owners and applicants.
What Information Must Be Reported?
Beneficial owners are individuals who either directly or indirectly (1) own or control 25% or more of the company’s ownership interest or (2) exercise substantial control over the company. An applicant is an individual responsible for filing a new company’s documents with the state – however, only reporting companies formed in 2024 or later must report their applicants. The reported information for beneficial owners and applicants must include: the name of the individual, date of birth, address, and a unique identification number from an acceptable identification document. The information must also include the company’s name, any trade names, a current address, and a tax identification number.
When Must Businesses Comply?
Existing companies must disclose their BOI reports to FinCEN by January 1, 2025. Entities created in 2024 must report their information within 90 days of formation, and those formed after 2024 must report within 30 days. Companies should update any changes to personal information within 30 days of such change. Failure to comply with the CTA could result in civil penalties of up to $591/day and/or criminal penalties of up to two years in prison and a fine of up to $10,000.
While the CTA aims to improve transparency, it poses challenges for small farms and agriculture businesses who must comply. Entities should be aware of fraudulent attempts to solicit information, as these have already begun to occur. Additionally, there is ongoing litigation as to whether the Act is constitutional, but, for now, FinCEN will continue to implement the CTA. Ultimately, it is important for companies to not delay filing and ensure that personal information is handled securely. Does your business need to report its BOI? If you are unsure, make sure to contact an attorney.
Author: Ainsley Peterson
