The Corporate Transparency Act (CTA) went into effect on January 1, 2024, requiring millions of small businesses across the U.S. to register with the Department of Treasury. Under the new legislation, businesses that meet certain criteria must submit a Beneficial Ownership Information (BOI) Report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), providing details identifying individuals who are associated with the reporting company.
The CTA was established to prevent individuals from hiding or benefitting from the ownership of U.S. entities to facilitate illegal operations, which Congress believes is a tactic that affects national security and economic integrity.
Who Needs to File?
The CTA applies to domestic and foreign business entities including:
- Limited liability companies (LLCs)
- Corporations
- Limited partnerships (LPs) and Limited liability partnerships (LLPs)
- Other entities created by filing a document with a Secretary of State or similar office
These entities, known as “reporting companies,” must file a BOI report with FinCEN, unless they qualify for one of the 23 listed exemptions.
Who is considered a beneficial owner of a company?
Under the CTA, an individual is a beneficial owner if they directly or indirectly have a significant ownership stake in a company. This person either has a major influence on the reporting company’s decisions or operations, owns at least 25% of the company’s shares, or has a similar level of control over the company’s equity.
What information must be reported about a company’s beneficial owners?
Businesses registered or established after January 1, 2024, must provide information regarding the business, its beneficial owners, including owners’ and applicants’ (if applicable) names, addresses, birthdays, and identification numbers. However, businesses established before January 1, 2024 do not need to submit information regarding company applicants.
All reporting companies must provide their legal name and trademarks, as well as their current U.S. address. Foreign-based companies must provide their U.S. operational location. They must also provide a taxpayer identification number and specify the jurisdiction where they were formed or registered.
What is the beneficial ownership information reporting process?
Qualifying reporting companies established before January 1, 2024, have a filing deadline of January 1, 2025. Those created after January 1, 2024 but before December 31, 2024 will have 90 days from either the actual notice of formation or public announcement, whichever comes first, to file. Businesses established on or after January 1, 2025, will have 30 days from notification or public announcement of their formation to submit their first report to FinCEN.
There is no fee for submitting the BOI report, and electronic forms will be available on FinCEN’s website.
Penalties for Non-Compliance?
Failure to comply with the CTA can result in significant penalties, including civil fines of up to $500 per day and criminal penalties of up to $10,000 or imprisonment for up to two years.
If you have questions or concerns regarding the CTA and BOI filings, or other questions related to business formation or requirements, please so not hesitate to contact the attorneys at Ward, Shindle & Hall.
