The Corporate Transparency Act (CTA) is transforming how businesses report their ownership details, promoting transparency and combating financial crimes. The upcoming Beneficial Ownership Information (BOI) reporting deadline, set for January 1, 2025, is critical for entities to understand and comply with. This article unpacks the CTA, explains BOI requirements, highlights exemptions, and discusses the consequences of non-compliance.
What Is the Corporate Transparency Act?
The CTA, enacted in January 2021 as part of the Anti-Money Laundering Act, requires certain businesses to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). Its purpose is to:
- Prevent the misuse of anonymous shell companies for illicit activities such as money laundering and tax evasion.
- Strengthen national security by enhancing financial transparency.
The CTA mandates the submission of Beneficial Ownership Information Reports (BOIRs) for covered entities, detailing their beneficial owners and company applicants.
What Is Beneficial Ownership Information (BOI)?
BOI includes identifying details about individuals who directly or indirectly exercise substantial control over the reporting company or own at least 25% of its equity interests. Details required in the report include:
- Full legal name.
- Date of birth.
- Current residential or business address.
- A unique identifying number from a government-issued ID (e.g., driver’s license or passport).
For entities formed after January 1, 2024, information about company applicants—the individuals who file the formation or registration documents—is also required.
BOI Reporting Requirements: Small Entity Compliance Guide
The Small Entity Compliance Guide simplifies the reporting process for businesses. Key takeaways include:
- Who Must File:
Any corporation, LLC, or similar entity created or registered in the U.S. or foreign jurisdictions, unless exempt. - Exemptions:
Certain entities, such as publicly traded companies, banks, and tax-exempt organizations, are exempt. A comprehensive list of exemptions can be found on FinCEN’s website. - How to File:
Reporting is conducted through the BOI Filing Portal, accessible via the FinCEN website. - Deadline:
Businesses formed before January 1, 2024, must report by January 1, 2025. New entities formed on or after January 1, 2024, must file within 30 calendar days of formation or registration.
Consequences of Non-Compliance
Failing to meet BOI reporting requirements can lead to severe penalties:
- Civil Penalties:
- Fines of up to $500 per day for each day the violation continues, capped at $10,000 per violation.
- Criminal Penalties:
- Fines of up to $10,000 or imprisonment for up to two years for knowingly submitting false information or willfully failing to file.
Additionally, the Treasury Secretary has the authority to seek court orders to enforce compliance.
Steps to Comply with BOI Reporting
To ensure compliance, businesses should:
- Determine Applicability:
Review whether your entity qualifies as a reporting company or is exempt. - Gather Information:
Collect the required details for all beneficial owners and, where applicable, company applicants. - File on Time:
Use the BOI Filing Portal and follow instructions in FinCEN’s video tutorials. - Seek Professional Guidance:
Consult with legal or accounting professionals for complex ownership structures or exemption qualifications.
What Happens if You Don’t File?
Non-compliance doesn’t just risk financial penalties—it can harm a business’s reputation, disrupt operations, and attract regulatory scrutiny. Moreover, repeated violations may lead to long-term legal challenges and criminal investigations.
Beneficial Ownership Reporting Resources
FinCEN offers several resources to help businesses navigate BOI reporting requirements:
- BOI Filing Portal: The official platform for filing reports.
- Instructional Video: Step-by-step guidance on completing BOI reports.
- Small Entity Compliance Guide: Simplified reporting guidance.
- BOI FAQs: Answers to frequently asked questions.
Conclusion
The Corporate Transparency Act introduces significant changes that demand businesses’ attention. With the January 1, 2025, BOI reporting deadline fast approaching, proactive compliance is essential. Failure to report can result in hefty fines, legal actions, and reputational damage. Take advantage of available resources to ensure your business is on the right side of the law.
For personalized assistance with BOI reporting, contact us today.
