The Corporate Transparency Act (signed into law on Jan. 1, 2021) expanded anti-money laundering laws and created new reporting requirements for certain companies doing business in the US. Beginning in 2024, many small businesses are required to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN) in an effort to create a national database for use by national security and law enforcement agencies to prevent the use of shell companies for criminal activity.
While Rea & Associates is not able to assist clients with their compliance with the CTA, the following information is intended to make you aware of this new, non-income tax related, filing requirement. There are significant penalties for willfully failing to comply with these new rules- namely $500 per day that the report is late, up to a maximum of $10,000 and imprisonment for up to two years. Because of this we encourage you to consult your attorney as soon as possible for assistance with filing or for answers to your specific compliance questions.
Who Must File
- Domestic and foreign reporting companies are required to file reports.
- Reporting companies include corporations (including S corporations), LLCs, and other entities formed through the Secretary of State (SOS).
- Exemptions exist for sole proprietorships, trusts, and general partnerships.
- Large operating companies are also exempt if they have:
- More than 20 full-time US employees,
- An operating presence at a physical office within the US, and
- More than $5 million of US-sourced gross receipts
What Information Must be Provided
- Beneficial ownership information (BOI), including full legal names, dates of birth, street addresses and unique ID numbers. (The unique ID number can be from a non-expired US passport, state driver’s license, or other government-issued ID card.) If the individual does not have any of those documents, then a non-expired foreign passport can be used. An image of the document showing the unique ID number must also be included with the report.
- Beneficial owners are individuals with at least 25 percent of ownership or substantial control over the reporting company, such as senior officers.
- Company applicants (the person who files the document or registers the reporting company) must provide the same information that is required for beneficial owners.
Important Filing Dates
- Initial reports are due by Jan. 1, 2025 for existing reporting companies.
- For companies formed in 2024, initial reports are due 90 days after the entity’s creation or registration.
- For reporting companies created or registered after 2024, the initial report is due 30 days after the entity’s creation or registration.
- If there is a change to previously reported information about the reporting company or its beneficial owners, an updated report must be filed within 30 days of the change.
How to File
- BOI reports must be filed electronically (either web-based form or PDF) via FinCEN’s e-filing portal: http://boiefiling.fincen.gov/
- No filing fee is required
If you have specific compliance questions or would like assistance with your filing, we encourage you to contact your attorney. You can also find FAQs and other resources at http://www.fincen.gov/boi.
By Kaitlyn Robison, CPA, CFE (Independence office)