Enacted in 2021 to curb illicit finance, the Corporate Transparency Act (CTA) requires many companies doing business in the United States to report information about the individuals who own or control them. Beneficial Ownership Information reporting was developed in response to the CTA.
It is a one-time report, unless updates or corrections need to be made.
What are the Penalties for not Reporting?
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- Civil fines of up to $591 per day late, adjusted for inflation
- Criminal fines up to $10,000 and/or imprisonment for up to two years
Who Needs to Report?
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- Existing companies: Reporting companies created or registered to do business in the United States before January 1, 2024, must file by January 1, 2025. Reporting companies are entities created by filings with a secretary of state or equivalent.
- Newly created or registered companies: Reporting companies created or registered to do business in the United States in 2024 have 90 calendar days to file after receiving actual or public notice that their company’s creation or registration is effective.
Basic Questions to ask regarding the entities that need to report.
1. Is your entity a corporation, LLC, or similar entity?
– Yes → Move to the next question
– No → No filing required (End)
2. Is your entity registered with a state or tribal authority in the U.S.?
– Yes → Move to the next question
– No → No filing required (End)
3. Is your entity exempt under the Corporate Transparency Act?
Exempt Entities include:
– Publicly traded companies
– Government entities
– Banks and credit unions
– Tax-exempt entities (501(c) organizations)
– Inactive entities (defined under specific criteria)
– Subsidiaries of exempt entities
Exempt Industries include:
– Banks (regulated by a federal functional regulator)
– Insurance companies
– SEC-registered entities (e.g., brokers, dealers, or investment companies)
– Public accounting firms
– Utilities (subject to certain regulations)
– Pooled investment vehicles (e.g., mutual funds)
– Certain tax-exempt entities like churches, charities, and other nonprofits
– Yes (If your entity or industry falls under any of the exemptions) → No filing required (End)
– No → Move to the next question
4. Does your entity have more than 20 full-time employees in the U.S. and gross receipts or sales exceeding $5 million?
– Yes → Move to the next question
– No → Filing is required (End)
5. Does your entity have a physical business presence in the U.S. (i.e., not just a mailing address)?
– Yes → No filing required (End)
– No → Filing is required (End)
Who is a Beneficial Owner?
All individuals who:
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- directly or indirectly exercise substantial control over the company or
- own 25 percent or more of the equity in the company
What Information is Needed to File a Report?
Four pieces of information are needed for each beneficial owner:
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- name
- date of birth
- address
- the identifying number and issuer from either a non-expired U.S. driver’s license, a non-expired U.S. passport, or a non-expired identification document issued by a State (including a U.S. territory or possession), local government, or Indian tribe. An image of the document must also be submitted. If a filing is completed online, a copy of the identification document must be uploaded as part of the filing process.
In addition, the full business name, EIN, and address are needed to complete the filing. Companies created after January 1, 2024, must also provide information about the individuals who formed the company.
What if You Have Multiple Entities That Need to Report?
You may electronically apply for a FinCEN identifier. Once a beneficial owner or company applicant has obtained a FinCEN identifier, reporting companies may report it in place of the otherwise required four pieces of personal information about the individual in BOI reports.
In the application, an individual must provide their name, date of birth, address, unique identifying number and issuing jurisdiction from an acceptable identification document, and an image of the identification document – the same four pieces of personal information and image reporting companies submit about beneficial owners and company applicants in BOI reports above. After an individual submits an application, the individual will immediately receive a FinCEN identifier unique to that individual. If you want to obtain a FinCEN identifier, go to this link: FinCEN ID | Financial Crimes Enforcement Network (FinCEN).
Additional Resource:
The Small Entity Compliance Guide has answers to most questions and can be found here: BOI Small Compliance Guide v1.1 (fincen.gov).
Consult Your Attorney:
We suggest you consult with your attorney to assist you with the actual filing of the reports, but we are here to help you through the maze as needed. Please let us know if you have any questions or concerns.