Entertainers, Creators, Streamers, Influencers, and Service Providers Duties Under The Corporate Transparency Act
By Justin M. Jacobson, Esq.
In response to the growing global threat of money laundering and other “illicit finance and national security threats posed by corruption,” the U.S. Congress passed the Corporate Transparency Act (“CT Act”). This legislation created new obligations and requirements for all existing as well as any new U.S. and foreign businesses operating in the country. In particular, the law applies to any non-exempt corporations, limited liability companies (LLCs), and other formal entities created and operated in the United States. As a result, all creators, entertainers, streamers, gamers, and influencers as well as any professionals and companies serving these fields must comply with the act by filing the necessary Beneficial Ownership Information (“BOI”) form with a bureau of the U.S. Department of the Treasury, the Financial Crimes Enforcement Network (FinCEN). While there are some professions that are excused from this filing requirement, including tax-exempted entities and certain companies involved in the finance and accounting realms, the owners of a non-exempt entity that fails to comply with and file the required BOI document can be subject to potential fees and criminal liability including a possible “$500” a day financial penalty. Since most entertainment “loan-out” companies and other service-driven professions working within these industries operate entities that generally do not qualify for any of the statutory exemptions, it is crucial that any currently existing corporations and LLCs prepare and submit the necessary information prior to the mandated deadlines to avoid potential financial penalties and other potential liability. Furthermore, any individual or company wishing to open a new business entity in the future will also be required to comply with this reporting requirement by the stated deadline to stay in compliance and avoid monetary fines.
Specifically, this new law states that any business entity existing prior to January 1, 2024, must file an initial Beneficial Ownership Information report no later than January 1, 2025 unless the business falls within an exemption such as “banks, credit unions, money services businesses, securities brokers and dealers, insurance companies, accounting firms, and tax-exempt entities.” A failure to properly file the report by this date results in the entity’s owner potentially being assessed a monetary penalty of $500 per day. Additionally, the owner of any company created or registered on or after January 1, 2024, but before January 1, 2025, must file the initial Beneficial Ownership Information report within 90 calendar days after receiving notice that the entity’s registration is effective. Finally, for any business entity formed on or after January 1, 2025, the creator must file the required BOI document within 30 calendar days after the owner’s receipt that the entity is created.
Accordingly, the statute enacted various new reporting requirements for a business owner including mandating them to potentially submit information about the reporting company itself, the reporting company’s beneficial owners, and/or a “company applicant” (a third-party entity that filed the paperwork to create the entity on the reporting company’s behalf). Generally, an initial BOI report includes information on all the “beneficial owners” of an entity as of the time of the filing, including each owner’s full name, date of birth, residential address, and an image of an “identification document” confirming their identity such as a valid U.S. passport or U.S. driver’s license. Furthermore, any new entity that is created on or after January 1, 2024, is also required to file an additional document, a company applicant’s report (31 CFR § 1010.380(b)(2)(iv)). In a situation where a reporting company document filing is required, the submission incorporates information on the filing entity’s formal legal name, the current address of the company’s principal place of business, the state jurisdiction for the filing party, and the entity’s Taxpayer/Employer Identification Number (EIN/Tax-ID). However, it is important to note that any entities formulated prior to January 1, 2024, are not required to file a company applicant report but they must still file the initial Beneficial Ownership Information report by the above listed deadline.
In conclusion, all entertainers, musicians, athletes, celebrities, influencers, creators, and all business operators must ensure that they comply with the newly enacted Corporate Transparency Act. Any person or business that willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues as well as to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Luckily for creators, streamers, gamers, entertainers, and any business owners, there is no annual reporting requirement as a non-exempt reporting company must just file an initial BOI report by the above deadline and then that is it. In fact, there are no further obligations or work on behalf of the business owner other than to submit additional documents whenever the existing information needs to be updated or corrected.
This article is not intended as legal advice, as an attorney specializing in the field should be consulted.
© 2023 Justin Jacobson Law, P.C.