On The Corporate Transparency Act & Beneficial Ownership

Attention business owners: there’s a new law going into effect this year, and we want to make sure you’re aware and prepared for it. 

As stated by the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, “In 2021, Congress enacted the Corporate Transparency Act. This law creates a beneficial ownership information reporting requirement… to make it harder for bad actors to hide or benefit from… shell companies or other opaque ownership structures.”

With this law in effect since the 1st of this year, many U.S. companies will be required to report information on their beneficial owner(s)— any person who owns at least 25 percent of a company or has “substantial control” over it. This beneficial ownership information must be reported to FinCEN, and can be done electronically through their website.

We realize that a policy change such as this can be a lot to take in at once, so we want to break it all down. The first step is determining whether or not your business qualifies as a “reporting company.”

 

Is My Business Required to Report?

 

If your company was created under U.S law, you may be required to report if any of the following criteria is met:

• If your company is a corporation

• If your company is an LLC

• If your company was created through the filing of a document with a Secretary of State or similar office under the law of a State or Indian tribe

 

If your company was created under foreign law, you may be required to report if the following criteria is met:

• If your company has registered to do business inside any U.S. State or Tribal jurisdiction by filing a document with a Secretary of State or similar office of the State or Tribe.

 

With the basic criteria out of the way, it’s important to note that there’s an extensive list of exemptions that many companies may qualify for in terms of whether or not they will need to report. Here’s the list at a glance:

 

 

There are also exemptions for individuals who would otherwise be considered a beneficial owner. A person who otherwise meets the definition of a beneficial owner is exempt from reporting if they are:

• A nominee, intermediary, custodian, or agent

• An employee

• An inheritor

• A creditor

• A minor child

 

For each exemption for both companies and individuals, there is specific qualifying criteria that must be met, so we recommend reading the BOI Small Entity Compliance Guide for the full scoop. 

 

What Information is Needed?

 

For the reporting company: 

• Full legal name

• Any trade name or “doing business as” (DBA) name

• Complete current U.S. address (the principal place of business within the U.S., or the primary U.S. location in which the company conducts business if the principal place is outside of the U.S.)

• State, Tribal, or foreign jurisdiction of formation

• IRS Taxpayer Identification Number (TIN) *including an Employer Identification Number (EIN)

 

For each beneficial owner and company applicant:

• Full legal name

• Date of birth

• Complete current address (each individual’s residential address. This is not required to be in the U.S.)

• Unique identifying number and issuing jurisdiction from, and image of, one of the following non-expired documents: U.S. passport, state driver’s license, identification document issued by a state or local government or tribe, OR if you don’t have any of the aforementioned documents, you may use a foreign passport

Gathering the actual information for the report is the least tricky part; half the battle is simply finding out whether you need to report, and who you need to include in your report. 

 

How Long Do I Have to File a Report?

• If your company was created or registered prior to January 1, 2024, you will have until January 1, 2025.

• If your company was created or registered on or after January 1, 2024, and before January 1, 2025, you must report within 90 calendar days after receiving actual or public notice that your company’s creation or registration is effective, whichever is earlier. 

• If your company was created or registered on or after January 1, 2025, you must file your report within 30 calendar days after receiving actual or public notice that its creation or registration is effective. 

• Any updates or corrections to beneficial ownership information that you previously filed with FinCEN must be submitted within 30 days.
  

 

What Happens if I Don’t Report?

According to FinCEN, if a person willfully fails to report complete and accurate beneficial ownership information, they could incur civil penalties of up to $500 per day as long as the violation continues, or criminal penalties including imprisonment for up to two years and/or a maximum fine of $10,000. FinCEN also warns that “senior officers of an entity that fails to file a required BOI report may be held accountable for that failure.”

So do take this new law seriously, but at the same time, don’t panic! Even if your business was only created this year, you have plenty of time to report, and you have even longer if your business was created before 2024. Be sure to read up on the material we’ve shared, as it can help you iron out the nitty gritty details you’ll need to successfully file your report. And we hope this blog was helpful, too. We pride ourselves on staying up to date on the latest laws and regulations, and part of what we do is ensure that we pass this valuable knowledge on to the business owners it impacts.