Corporate Transparency Act – Beneficial Ownership Information Reporting Requirements

February 6, 2024

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a Final Rule addressing reporting obligations concerning beneficial ownership information (“BOI”) under the Corporate Transparency Act (“CTA”) aligning with the US federal government’s aim to mitigate corruption, money laundering, terrorism, fraud, and other illicit activities. Consequently, certain types of U.S. and foreign entities must disclose BOI to FinCEN regarding their beneficial owners and individuals responsible for registering or forming the Reporting Companies (as defined below).

In this alert, we summarized the applicability of the CTA rule to Puerto Rico-organized entities (i.e., corporations, limited liability companies or any other similar entity created by the filing of a document with a secretary of state or similar office under the law of the state), with a focus on provisions of the CTA that entered into effect on January 1, 2024.

Entities organized both in the U.S. and outside the U.S. (including Puerto Rico) maybe subject to the CTA’s reporting requirements. Companies that do not fall within one or more of the twenty-three (23) exemptions set forth in the Final Rule (“Reporting Companies”), must file reports with FinCEN which include personal information on beneficial owners and control persons.

Reporting Companies and Beneficial Ownership Information

There are two types of Reporting Companies: (1) domestic reporting companies, and (2) foreign reporting companies.

• A domestic reporting company refers to any corporation, a limited liability company, or any other entity created by the filing of a document with a secretary of state or any similar office under the law of a U.S. state (including Puerto Rico).

• A foreign reporting company is a corporation, limited liability company, or other entity formed under the law of a foreign country by the filing of a document with a secretary of state or any similar office under the law of a U.S. state (including Puerto Rico).

A beneficial owner is defined as (i) an individual who, directly or indirectly, exercises “substantial control” over the entity (including, but not limited to, senior officers) or (ii) owns or controls at least 25% of the ownership interests of the reporting company.

The CTA Final Rule refers to “substantial control” of a reporting company if it meets any of the following criteria:

1. the individual is a Senior Officer of the reporting company (i.e. President, CEO, General Counsel, COO, CFO, or any other position that performs a similar function as any of the above officers)

2. the individual has authority to appoint or remove any Senior Officer (as defined in the CTA and CTA Final Rule) or a majority of directors of the reporting company

3. the individual is an important decision-maker (regarding the reporting company’s business, finances, or structure), or

4. the individual has any other form of substantial control over the reporting company.

Furthermore, the CTA does not consider the following a beneficial owner: a minor (though the parent or guardian’s information must be reported); an individual acting solely as a nominee, intermediary, custodian, or agent on behalf of another individual; certain employees; an individual whose only interest in the reporting company is through inheritance; or a creditor of a reporting company.

What type of information is required to be reported?

For the BOI report, the reporting company must provide: its full legal name, trade names, or D/B/As, a complete US physical and mailing address, its jurisdiction of formation (domestic or foreign, as applicable), the state in which it first registered to conduct business (only applicable to foreign Reporting Companies), and, its Employer Identification Number (EIN), Taxpayer Identification Number (TIN), or foreign identification number (if it does not have a TIN).

Also, for the beneficial owner, the reporting company must provide: their full legal name, their birthdate, complete US physical and mailing address, and, unique identification number issued by the state or foreign jurisdiction (i.e., a valid passport; a current identification issued by a state or local government; a current driver’s license issued by a state; or a current foreign passport, if none of the other documents are available).

An image of the unique identification document must be included with the BOI report (BOI Information). Individuals may obtain FinCEN identifiers by voluntarily submitting the BOI Information to FinCEN. Once a beneficial owner has obtained a FinCEN identifier, reporting companies may report it in place of the otherwise required pieces of personal information.

Deadline to file the BOI Report with FinCEN

Reporting Companies organized or authorized to conduct business before January 1, 2024 will have until January 1, 2025 to file their initial BOI reports. Reporting companies organized or authorized to conduct business on or after January 1, 2024, but before January 1, 2025, will have 90 days from the date of their organization (or authorization to do business) to file their BOI reports with FinCEN.

As of January 1, 2025, reporting companies organized or authorized to do business on or after such date must file their BOI reports within 30 days after the date of their organization (or authorization to do business).

Once the initial report is filed with FinCEN, Reporting Companies will have to make additional filings if there are any changes to their reported information, which must be filed within 30 days after each change

Penalties for failure to comply with the reporting requirement

Puerto Rico organized entities, as well as foreign entities authorized to conduct business in the Commonwealth of Puerto Rico, are advised to review the CTA and CTA Final Rule to determine whether they will qualify as Reporting Companies and to comply with the required deadlines.

Failure by a reporting company to file a complete or updated BOI to FinCEN, or the willful provision of or attempt to provide false or fraudulent BOI may result in civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, and/or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000 (which does not include potential state penalties).

If you need assistance or additional information regarding this filing, kindly, let us know as soon as possible.

Informative Bulletin

At KRESTON PR, LLC we are ready to assist you. Contact us for additional information.

KRESTON PR, LLC

1509 FD Roosevelt Avenue Suite 303 / Guaynabo, PR 00968-2612

PO Box 193488 / San Juan, PR 00919-3488

Tel. (787) 646-4611 / Fax (787) 764-8688 Web: www.krestonpr.com / www.kreston.com

Email Taxes: fsanchez@krestonpr.com

IMPORTANT DISCLAIMER: This bulletin and its content do not constitute advice. It is intended for information purposes only and should not be regarded as specific advice. Accordingly, no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors and ensuring that such advice specifically relates to their particular circumstances.

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