2024 FinCEN Reporting Requirements
The Corporate Transparency Act (CTA) came into effect in January 2024. The CTA requires most legal entities, domestic and foreign, to disclose ownership information. Thus, understanding how it will impact your business is essential.
Failure to comply with the CTA may result in severe consequences, including criminal charges, fines up to $500 a day, and imprisonment.
What is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) is a legal requirement introduced by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) to enhance corporate ownership transparency. The law focuses on stopping illegal activities, such as hiding the people who control fake companies, like shell and front companies.
Does the CTA impact your company?
Under the CTA, companies are required to submit information about their beneficial owners, providing transparency on the individuals who exercise substantial control or own significant stakes in these entities.
The CTA applies to:
Domestic entities: Corporations (C-Corps) and Limited Liability Companies (LLCs) are required to file a Beneficial Ownership Information (BOI) report.
Foreign entities: C-Corps or LLCs that are registered to do business in any U.S. state are also required to file a Beneficial Ownership Information (BOI) report.
The CTA exempts companies with a workforce exceeding 20 employees, gross receipts surpassing $5 million, and a physical office within the United States.
The CTA’s Reporting Rule specifies twenty-three (23) distinct entity types that are not subject to this reporting obligation, as detailed in the Small Entity Compliance Guide issued by the Financial Crimes Enforcement Network (FinCEN).
If you have any questions whether the CTA applies to your company, we strongly recommend that you contact us for a consultation.
How does the CTA impact your business?
If your company falls under the scope of the CTA, you will be required to file a Beneficial Ownership Information (BOI). This requirement extends to identifying and documenting the individuals who have significant control or hold a substantial interest in your company. It may also apply to the company applicant.
Definition of a Beneficial Owner
A beneficial owner under the CTA is defined as any individual who:
1) Directly or indirectly exercises substantial control over the reporting company.
2) Directly or indirectly owns or controls at least 25 percent of the ownership interests of the reporting company.
Definition of a Company Applicant
Companies formed or registered on or after January 1, 2024, are also required to report their company applicants. A company applicant is defined as one of the following:
The primary filer: This is the individual who directly files the document that creates or registers the company.
The principal controller: If more than one person is involved in the filing, it refers to the individual primarily responsible for directing or controlling the filing process.
What information do you need to file a BOI?
In order to file the BOI report, you will need the following information:
Identifying Information: Full legal names, dates of birth, addresses, and identification numbers (such as a passport or driver’s license number) for each beneficial owner and company applicant.
Company Details: Legal name, any trade names used, business address, and state of formation of the entity.
Documentation: Copies of identification documents for all reported individuals must be included to verify the information provided.
Penalties for not filing/not correctly reporting
Failure to file the BOI report can result in civil fines of $500 per day, up to $10,000 per violation. Additionally, there are criminal penalties, including up to two years’ imprisonment for violations of the CTA. To prevent fines and legal trouble, file promptly and maintain accurate records.
CTA Reporting Deadlines
There are two (2) deadlines which may apply, depending on when your company was formed:
Entities formed before January 1, 2024: File the BOI report before January 1, 2025.
Entities formed on or after January 1, 2024: File within 90 days of formation.
Ongoing Reporting Requirement
After filing the initial report, there are no annual or quarterly filing requirements. However, companies must file an updated BOI report within 30 days after any change occurs in your company’s information or its beneficial owners that were previously reported.
How to File a BOI
A Beneficial Ownership Information (BOI) may be filed directly on FinCEN’s portal.
Corporation Builders will file your Beneficial Ownership Information. Corporation Builders offers the lowest price of any other reporting service.
Conclusion
The Corporate Transparency Act marks a new era of corporate responsibility. We will endeavor to keep you informed, and to help you navigate these new regulations with confidence.
We understand you may have questions regarding the CTA. Please feel free to contact us for a consultation.