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Corporate Transparency Act Beneficial Owner Information FAQs

Updated Jan. 9, 2024

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A new law went into effect Jan. 1, 2024 that impacts all SPV and Fund entities administered by Loon Creek. The Corporate Transparency Act now requires businesses operating in the U.S. to report Beneficial Owner Information into the Financial Crimes Enforcement Network (FinCEN) database that is operated by the U.S. Department of the Treasury. This law is retroactive, meaning that all existing entities have until Dec. 31, 2024 to report the required information or risk significant penalties. For any entities formed in 2024, the deadline for filing with FinCEN is 90 days after the entity has been filed with the state. For these entities, Loon Creek includes the initial FinCEN filing as part of its formation services. Note: this filing is the responsibility of the entity and its members and Loon Creek is not responsible for any failure to report. Penalties for non-compliance will be assessed to the SPV or Fund and paid by the individual causing the late filing to occur.  

 

What information must be reported?

There are two types of information required. First for the entity itself, and second for the company applicant and any beneficial owners (defined below):

  • Entity information

    • Full legal name or DBA name

    • Current address

    • Jurisdiction of formation or registration

    • Taxpayer ID number (EIN)

  • Company Applicant/Beneficial Owners

    • Individual’s full legal name (no entities allowed)

    • Date of birth

    • Current address (residential only for Beneficial Owners)

    • ID number from state or federally-issued ID (passport, driver’s license, etc)

    • Copy of state or federal photo ID

    • Note: Individuals may apply directly with FinCEN to obtain a FinCEN number, and may provide their FinCEN identifier instead of the information listed above. See: https://fincenid.fincen.gov/ 

 

Who is a “Beneficial Owner”?

Beneficial owners: 

​a. Exercise substantial control.  This would include the Manager of each SPV/Fund.

b. Substantial owners, defined as owning 25% or more of the SPV/Fund. 

 

What are the penalties for non-compliance?

Failure to meet the reporting requirements can result in civil or criminal actions. Willful failure to file a complete initial or updated report with FinCEN is subject to a $500 per day fine, up to $10,000 and imprisonment for up to two years. 
 

Trusts

Trusts are generally not considered reporting companies, as they typically do not file registration documents with a State. However, a trust that owns 25% or more of an SPV or Fund is required to be reported as a Beneficial Owner with FinCEN. Additionally, beneficiaries of the trust, as well as anyone who has authority to dispose of trust assets, are required under the Act to be disclosed as beneficial owners.

 

Entities

If you invested in the SPV or Fund through an entity such as an LLC, corporation or trust, the SPV or Fund is required to “look through” the intermediary entity to report any underlying individuals who indirectly own 25% or more of the SPV or Fund. This may or may not create a reporting requirement based on the ownership of the intermediary entity. 

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Isn’t my SPV exempt from reporting as a “Pooled Investment Vehicle”?
The CTA does include an exemption for ‘pooled investment vehicles’ (i.e. any fund that relies on an exclusion from the definition of “investment company” in the Investment Company Act of 1940). However, such fund must be operated or advised by a registered investment adviser (“RIA”) or venture capital fund adviser that is identified by filing a Form ADV with the SEC. Note that there are no exemptions to reporting for exempt reporting advisers (“ERAs”) and state-registered advisers. Loon Creek is the Administrator of your fund or SPV and not the Manager or an adviser. Unless your fund or SPV Manager is a RIA or federally registered venture capital fund adviser, your fund or SPV will be required to file with FinCEN.

 

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Additional Resources:

 

Disclaimer: Loon Creek has expended many hours and legal fees to research this matter and to provide the best support we can to our clients, but this notice is for informational purposes only and is not intended to convey legal advice. The information presented here should not be relied upon in regard to any particular facts or circumstances without consulting your own legal counsel.

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