Are you an owner of a corporation, LLC, limited partnership, or any entity whose existence is created by a filing with a secretary of state in any state? If so, your business may be subject to new requirements under the Corporate Transparency Act’s (CTA) Beneficial Ownership Information (BOI) reporting.
The Corporate Transparency Act was passed by Congress in 2021, aimed at making it more difficult for businesses operating in the US to launder money gained from criminal activity. According to Congress, such illegal activity is a popular tactic for facilitating tax fraud, financing terrorism, and supporting other nefarious activity that negatively impacts US national security and economic integrity.
The principal thrust of the new requirements is acquisition of information about the ownership of corporations, LLCs (including single-member LLCs), limited partnerships, and other business entities that are created by means of a filing with a secretary of state or comparable office. The reporting requirements also apply to foreign-owned companies operating in the US under similar registration with a domestic governmental entity. Owners of such companies are defined as persons who, directly or indirectly, have a significant influence on the entity’s operations or decisions, who own at least 25% of the company’s shares, or who have a similar level of control over the equity of the company. The BOI reports will be collected by the US Treasury’s Financial Crimes Enforcement Network (FinCEN) and used as a database to facilitate enforcement.
For entities formed prior to January 1, 2024, the deadline to file the report is January 1, 2025. Businesses organized after January 1, 2024 but before January 1, 2025, will be required to file the BOI report within 90 days of either the actual notice of formation or public announcement, whichever comes first. Businesses organized after January 1, 2025 must file within 30 days of notification or public announcement.
According to estimates by the US House of Representatives, some 32.6 million businesses will be required to file BOI reports in 2024, and an additional 5 million companies are expected to report in each of the following nine years. Clearly, the Act is exceedingly broad in reach. And failure to report can carry some pretty stiff consequences, including civil penalties of $500 per day, up to $10,000, and criminal penalties that include imprisonment for up to two years.
Business owners can learn more about the new requirements—including the information that must be provided to FinCEN—and file reports at https://www.fincen.gov/boi.
Frequently asked questions, including information about fines and other penalties, can be found here: https://www.fincen.gov/boi-faqs.
FinCEN also has a helpful introductory brochure, “Introduction to BOI Reporting,” that can be viewed or downloaded at: https://www.fincen.gov/sites/default/files/shared/BOI%20Informational%20Brochure%20508C.pdf.
Please note: These filings are not prepared by The Planning Center. You have sole responsibility for your compliance with the CTA, including its BOI reporting requirements and the collection of relevant ownership information. Please consult with your business attorney for guidance regarding the applicability of the CTA’s reporting requirements and preparation of the filings for your business.
