Effective January 1, 2024, the Corporate Transparency Act (CTA) created a new reporting requirement for millions of companies doing business in the U.S. Certain companies must submit Beneficial Ownership Information (BOI) to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). The goal of the CTA is to address illicit activities such as money laundering and tax evasion by creating a national database for use by national security and law enforcement agencies to prevent the use of shell companies for criminal activity.
Who is required to file?
Under the CTA, the following domestic and foreign entities are considered “reporting companies” and must file a BOI report with FinCEN unless they qualify for an exemption:
- Corporations (including S corporations)
- Limited liability companies
- Other entities created by filing a document with a secretary of state or similar office
In all, 23 categories of exemptions are available for businesses, such as certain tax-exempt entities and publicly traded companies. Additionally, certain large operating entities that employ more than 20 people in the U.S., reported more than $5M on the previous year’s tax return, and are physically located in the U.S. are exempt from filing. A full list of exemptions can be found on the FinCEN website under FinCEN FAQs.
Who is a “beneficial owner?”
All reporting companies must submit BOI to FinCEN. A “beneficial owner” is an individual who exercises substantial control over the company or who owns or has control over at least 25% of the business interests. A business may have an unlimited number of beneficial owners.
What information must be reported?
The BOI includes an owner’s full legal name, date of birth, street address, and a unique ID number. The unique ID number can be from a non-expired U.S. passport, state driver’s license, or other government-issued ID card.
Reporting companies created on or after January 1, 2024, must also provide BOI for the “company applicant,” which refers to the individual filing the document to create or register the domestic or foreign company. This includes individuals responsible for overseeing or controlling the filings.
What are the required reporting dates?
Existing companies must file a BOI report with FinCEN within one year of the effective date of the CTA, which was January 1, 2024. Reporting companies newly formed or registered in 2024 must file within 90 days while reporting companies formed or registered after 2024 must file within 30 days of the entity’s creation or registration. If the reporting company needs to modify previously reported information about itself or its beneficial owners, an updated report must be filed within 30 days of the change.
What are the penalties for non-compliance?
Willful failure to file an initial, updated, or corrected report or for providing false or fraudulent information is subject to a $500-per-day penalty, up to $10,000, and up to two years in prison for the beneficial owner who filed the report.
How do I file a BOI report?
BOI reports must be filed electronically using FinCEN’s e-filing portal by either completing a web-based version of the form and submitting it online or by uploading a completed PDF version of the BOI report. Some third-party service providers may also offer the ability to file the BOI report through their software. The person who submits the BOI report will need to provide their name and email address to FinCEN. Filing the report is free of charge.
What else to know?
FinCEN also has a Small Entity Compliance Guide and frequently asked questions to help businesses navigate the reporting requirements. Learn more about these FinCEN resources.
How PYA Can Help
Many clients have questions concerning whether the CTA applies to them and if so, how to comply. As certified public accountants, we can provide general information regarding the CTA and BOI reporting, but making interpretations and determinations around the legal specifics would need to be a collaborative effort among your accounting team, your legal counsel, and the taxpayer’s governance leadership. For specific guidance regarding your company’s obligations, we recommend you speak with legal counsel in the jurisdiction in which your business operates as well as your insurance carrier.
Our executive contacts would be happy to discuss CTA and BOI reporting with you and provide you with recommendations for legal counsel assistance. You may contact them via email or by calling (800) 270-9629.
