As of January 1, 2024, tens of millions of small businesses, private companies, and other entities must comply with the Corporate Transparency Act by filing information about their beneficial owners – the individuals who ultimately own or control the company.
The Corporate Transparency Act (CTA) requires reporting companies that file incorporation paperwork with secretaries of state or tribal authorities to also file a Beneficial Ownership Information (BOI) report with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). This provision in the CTA aims to deter illegal financing activities and combat the use of shell companies and other practices for criminal purposes, including bribery, money laundering, terrorism financing, tax fraud, and various other unlawful activities.
Many small businesses are uncertain about whether they need to file or either unsure whether their organization is required to file or are completely unaware of the new requirements. If you have questions about who is required to file, what information must be reported, and when, here are some answers.
What is BOI? Who’s Considered to be a Beneficial Owner?
FinCEN defines Beneficial Ownership Information as “identifying information about the individuals who directly or indirectly own or control a 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 percent of the reporting company’s ownership interests.”
Who is Exempt from filing a BOI?
Generally, government entities and regulated entities that already report their BOI to government entities are exempt. In addition, FinCEN has published a list of 23 exempted entities: public companies, banks, credit unions, broker-dealers, securities exchanges, investment advisers, venture capital fund advisers, insurance companies, Commodity Exchange Act registered entities, accounting firms, public utilities, tax-exempt entities, large operating companies, and inactive entities.
When must my company file its BOI?
New reporting companies—formed on or after Jan. 1, 2024—have 30 days from the date they receive notice of the company’s creation to file their initial BOI report with FinCEN. Reporting companies created or registered to do business before Jan. 1, 2024, will have one year (until Jan. 1, 2025) to file.
What information must my company submit about itself?
A reporting company must report its legal name; any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names; the street address of its principal place of business in the United States; its jurisdiction of formation or registration; and its taxpayer identification number.
For each person who is a beneficial owner, a reporting company must provide the individual’s name; date of birth; residential address; and an identifying number from an acceptable identification document, such as a passport or U.S. driver’s license.
What happens if my company doesn’t submit BOI to FinCEN?
The Corporate Transparency Act specifies civil penalties of up to $500 per day for each ongoing violation, along with criminal penalties that may include up to two years of imprisonment and a fine of up to $10,000.
As outlined by FinCEN, potential violations encompass willfully neglecting to submit a beneficial ownership information report, willfully submitting false beneficial ownership information, or willfully neglecting to rectify or update previously reported beneficial ownership information.
Still have questions? PriceKubecka has answers.
If you’re still not sure if or when your company must file a BOI, PriceKubecka can answer your questions. And while PriceKubecka does not file BOI reports, we have extensive relationships with attorney firms that specialize in CTA compliance. CONTACT US today to learn more and get started on this required filing.