In 2021, Congress enacted the Corporate Transparency Act. This law creates a beneficial ownership information reporting requirement for millions of businesses across the country. Beginning January 1, 2024, many companies will have to report information about their beneficial owners to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Failing to comply will expose you to hefty penalties, and in some situation, imprisonment time.
We, at Taxville Financial, are still working with our legal counsel to determin how can we help our clients with the CTA filing requirements and if we will be able to offer this as a service. Assisting you with your compliance with the Corporate Transparency Act (“CTA”), including beneficial ownership information (“BOI”) reporting, is not within the scope of our Tax, Payroll, Accounting, business formation and consultation, or any other current engagements. You have sole responsibility for your compliance with the CTA, including its BOI reporting requirements and the collection of relevant ownership information. We shall have no liability resulting from your failure to comply with CTA. Consider consulting with legal counsel if you have questions regarding the applicability of the CTA’s reporting requirements and issues surrounding the collection of relevant ownership information.
*Please note, a reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report. A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report.
We have included some key Q&As below from the FinCEN website to help you understand the new law and the new filing requirements. More information about the new law and the reporting requirements can be found on FinCEN’s beneficial ownership information webpage, www.fincen.gov
What is beneficial ownership information (BOI)?
Beneficial ownership information refers to identifying information about the individuals who directly or indirectly own or control a company.
What are the Penalties for not Complying – Compliance/Enforcement?
As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. That person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.
Should my company report beneficial ownership information now?
A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report.
A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report.
Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports with FinCEN.
What companies will be required to report beneficial ownership information to FinCEN?
Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.
Who is a beneficial owner of a reporting company?
A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests.
What is substantial control?
An individual can exercise substantial control over a reporting company in four different ways. If the individual falls into any of the categories below, the individual is exercising substantial control:
The individual is a senior officer (the company’s president, chief financial officer, general counsel, chief executive office, chief operating officer, or any other officer who performs a similar function).
The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company.
The individual is an important decision-maker for the reporting company. See Question D.3 for more information.
The individual has any other form of substantial control over the reporting company as explained further in FinCEN’s Small Entity Compliance Guide
What is an ownership interest?
An ownership interest is generally an arrangement that establishes ownership rights in the reporting company. Examples of ownership interests include shares of equity, stock, voting rights, or any other mechanism used to establish ownership.
What is Company Applicant
Only reporting companies created or registered on or after January 1, 2024, will need to report their company applicants.
An accountant or lawyer could be a company applicant, depending on their role in filing the document that creates or registers a reporting company. In many cases, company applicants may work for a business formation service or law firm.
Updated Report – Reporting Requirements
If there is any change to the required information about your company or its beneficial owners in a beneficial ownership information report that your company filed, your company must file an updated report no later than 30 days after the date of the change. The following are some examples of the changes that would require an updated beneficial ownership information report:
- Any change to the information reported for the reporting company, such as registering a new business name.
- A change in beneficial owners, such as a new CEO, or a sale that changes who meets the ownership interest threshold of 25 percent (see Question D.4 for more information about ownership interests).
- Any change to a beneficial owner’s name, address, or unique identifying number previously provided to FinCEN. If a beneficial owner obtained a new driver’s license or other identifying document that includes a changed name, address, or identifying number, the reporting company also would have to file an updated beneficial ownership information report with FinCEN, including an image of the new identifying document.
An updated BOI report can be submitted to FinCEN at any time. However, the reporting company is responsible for ensuring that updates are filed within 30 days of a change occurring. If a reporting company has engaged a third-party service provider to file BOI reports and updates on its behalf, then it should communicate any changes to its beneficial ownership information to the third-party service provider with enough time to meet the 30-day deadline.
If a beneficial ownership information report is inaccurate, your company must correct it no later than 30 days after the date your company became aware of the inaccuracy or had reason to know of it. This includes any inaccuracy in the required information provided about your company, its beneficial owners, or its company applicants.