Ultimate Quick Guide to Corporate Transparency Act (CTA) FinCen Mandatory Federal Compliance Reporting for Business Owners
The Corporate Transparency Act (CTA) has introduced new compliance requirements, significantly impacting the business world. This article aims to clarify the CTA for general business owners, with an emphasis on Beneficial Ownership Information (BOI) reporting. Initially, it's recommended to download the "Beneficial Ownership Information Reporting Requirements: Small Entity Compliance Guide" (Version 1.1, December 2023) from the Financial Crimes Enforcement Network (FinCEN) website, which details the BOI reporting requirements.
FinCEN also maintains a comprehensive website that assists in avoiding scams and guides on how to report and upload your BOI.
What Does the Corporate Transparency Act Mean for Business Owners?
The CTA primarily aims to increase transparency in financial transactions to combat money laundering, tax evasion, and other illicit activities. This results in additional reporting and disclosure requirements for business owners. The act mandates the disclosure of beneficial owners of entities, affecting business owners who typically operate through legal structures like LLCs, corporations, or partnerships.
What is a Beneficial Owner? A beneficial owner is an individual who, directly or indirectly, exercises substantial control over a company, owns 25% or more of the company’s interests, or receives substantial economic benefits from the company's assets. This new regulation demands that such owners' identities be disclosed to the government.
Mandatory Compliance: Please be advised that this is not an optional compliance matter. Adherence to this requirement is mandatory under federal law unless the entity falls under one of the 23 exemptions. The vast majority of companies will not fall under an exemption.
Cost: There is NO COST to report this information to FinCen on your own. You can do so by visiting their website here: https://www.fincen.gov/boi
When Do Business Owners Need to Comply with BOI Reporting?
Reporting companies created before January 1, 2024, must submit their initial BOI reports by January 1, 2025.
Reporting companies formed between January 1, 2024, and January 1, 2025, have 90 calendar days from their creation or registration to file.
Entities established on or after January 1, 2025, need to file within 30 calendar days of creation or registration notice.
Updates to Existing Information: Entities are required to update their BOI report within 30 days of learning of a change in the information previously reported.
Correction of Inaccuracies: If an entity discovers an inaccuracy in a previously filed BOI report, it must correct the report within 90 days of discovering the inaccuracy.
What Information Must a Business Owner Report?
The Beneficial Owner Information (BOI) Reporting Requirement necessitates the disclosure of specific information about the beneficial owners and company applicants. This includes:
1. Identifying Information: Names, birthdates, addresses, and unique identifying numbers from an acceptable identification document (e.g., passport, driver's license) of each beneficial owner and company applicant and an uploaded copy of that identification document.
2. Details about the Entity: The reporting company must provide its own information, such as the name, business address, jurisdiction of formation, and Tax Identification Number (TIN) or a similar identification number.
This information must be precise and regularly updated to reflect any changes in ownership or control.
What are the Penalties for Noncompliance for Business Owners?
Noncompliance or providing false information can lead to significant penalties, including civil penalties of up to $500 per day the violation continues (up to $10,000), and criminal penalties, including up to two years of imprisonment.
Can Business Owners be Exempt from BOI Reporting?
The CTA has 23 exemptions, primarily applying to entities heavily regulated by the government, such as banks, credit unions, and registered securities issuers. Entities owned or controlled by such exempt entities are not required to report. However, most private business entities will likely fall under the scope of the CTA.
How Should Business Owners Handle BOI Privacy Concerns?
Privacy loss is a major concern with the disclosures required by the CTA. Business owners should note that very few types of entities can bypass the CTA, except for those that qualify under one of the 23 exemptions.
How We Can Help: The Law Office of Alexis Hart McDowell is fully prepared to assist you in navigating this new requirement. We offer the following services:
Consultation: To understand how this affects your business and the steps needed for compliance, schedule a consultation with us at www.enterpriseesquire.com/calendar.
Submission Service: We can handle the submission of the required form on your behalf. This service is available for a fee, ensuring your compliance without the hassle. Email us by clicking here.
Further Information:
Visit the FinCen official website here: https://www.fincen.gov/boi
Download the FinCen BOI Small Entity Compliance Guide here: https://www.fincen.gov/boi/small-entity-compliance-guide
