Corporate Transparency Act

What is the Corporate Transparency Act?

The Corporate Transparency Act (CTA) mandates businesses to disclose beneficial ownership information to enhance transparency in corporate ownership and combat money laundering, terrorist financing, and other illicit activities.

Effective January 1, 2024, all corporations, LLCs, and similar entities must file a report unless exempted.

Who is required to file?

Certain corporations, limited liability companies (LLCs), and similar entities are required to report information about their Beneficial Owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.

What is a Beneficial Owner?

A beneficial owner is not always the person listed on the company documents. It’s an individual who meets any of the following criteria:

Owns 25% or more of the company’s shares
Exercises substantial control over the company, even without direct ownership
Receives substantial economic benefits from the company

Who is excluded?

Some entities are excluded from the reporting requirement, such as:

Sole proprietor businesses (unless SMLLC)
Rental property sole owners (unless SMLLC)
Farmers (unless SMLLC)
General partnerships that are not LLC’s
Grantor trusts
Charitable trusts
Irrevocable trusts

Large Company Reporting Exemption

More than 20 full time employees in the United States, and
Physical office in the United States, and
Prior year US tax return reflecting at least $5,000,000 in revenues.

What does the CTA mean for your business?

Over 30 million small businesses are expected to be impacted by the Corporate Transparency Act. If you own or manage a business registered in the United States, you may be required to file a Beneficial Ownership Information Report (BOI) with the Financial Crimes Enforcement Network (FinCEN).

What are the Penalties?

Failure to comply with the reporting requirements of the CTA can result in significant penalties, including civil monetary penalties and potential criminal penalties for willful violations.

Individuals who violate the regulations may face a civil penalty of up to $500 per day until the violation is corrected. They could also be subject to a criminal fine of up to $10,000 and/or imprisonment for up to two years.

When do you need to file the BOIR form?

The deadlines for filing a BOIR Form under the CTA can vary depending on when your company was formed and whether you are updating the information. Here are some deadlines to remember:

Established before January 1st, 2024: You have until January 1, 2025, to file a BOIR.
Established after January 1st, 2024: You have 90 days from the date of formation to file a BOIR.

Updating your BOIR Form: If there are any changes to your company’s beneficial ownership information, you must submit the update within one year of the change.

FinCEN Dates Matter

Effective January 1, 2024:

Businesses formed during 2024 will have 90 days to file initial reports.
Businesses formed before 2024 will have until January 1, 2025, to file initial reports.
Businesses formed after 2024 will have 30 days to file initial reports.
Corrected Reports are due within 30 calendar days after the reporting company becomes aware (or has reason to know) of an inaccuracy.

Noncompliance can mean a penalty of $500/day, as well as a possible felony charge with up to two years in prison.

NOTE: If you correct a mistake or omission within 90 days of the deadline for the initial report, you may avoid penalties.

Noncompliance can mean a penalty of $500/day, as well as a possible felony charge with up to two years in prison.

NOTE: If you correct a mistake or omission within 90 days of the deadline for the initial report, you may avoid penalties.

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Frequently asked questions

What happens after January 1, 2024?

Millions of companies in the United States must report information about their beneficial owners, i.e., those individuals who ultimately own or control the company. They must report this Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN).

Are there any exemptions to the Corporate Transparency Act reporting requirements?

Certain types of entities, like public companies and nonprofits, are exempt from the CTA.

Can I file the BOI Report myself?

Yes, but it can be complex. Consider consulting a qualified professional to ensure accuracy and timely compliance.

Can CPAs and other professionals file the BOIR form for their clients?

While FinCEN has expressed that non-lawyers can assist in filing Beneficial Ownership Information Reporting (BOIR) form, non-lawyers still remain unclear as to the scope and nature of assisting clients beyond the mechanical filing of the report. Remember, for millions of Reporting Companies, various components of the process will require careful consideration and application of laws and regulations. At this time, the AICPA and certain insurance providers are advising accounting firms that assistance could be construed as the unauthorized practice of law (UPL).

What happens if I don’t file or file inaccurately?

Penalties can include fines up to $10,000 as well as a possible felony charge with up to two years in prison.