Corporate Transparency Act (CTA): New BOI Reporting for 2024
08 January 2024
In 2021, Congress enacted the Corporate Transparency Act (CTA) to enhance transparency in entity structures and ownership to combat money laundering, tax fraud, and other illicit activities.January 1, 2024 Reporting
Beginning January 1, 2024, a new reporting requirement will be enforced, mandating entity owners to submit a Beneficial Ownership Information (BOI) Report to the U.S. Department of Treasury's Financial Crimes Enforcement Network (FinCEN). This reporting requirement is NOT a tax reporting requirement. Completing this BOI report may require assistance of a reporting company or authorized representative, most likely this representative should be the attorney group who prepared and filed your entity’s organizational documents. Non-compliance carries severe penalties. Willful failure to report or update beneficial ownership information, or willful providing of false or fraudulent information, may result in a civil penalty of up to $500 per day, and a criminal penalty of up to $10,000 and/or imprisonment of up to two years.
Who Must File a BOI Report?
All corporations, limited liability companies (LLCs), or other entities formed by filing documents with a Secretary of State or relevant authority under state or tribal law must submit a BOI report, unless they qualify for an exemption. These entities known as "domestic reporting companies" fall under the purview of the BOI reporting requirement.
Additionally, foreign entities registered to conduct business in the United States, known as "foreign reporting companies," are also obligated to file a BOI report including corporations, limited liability companies, or other entities formed under the law of a foreign country, and registered to do business in any U.S. state or in any Tribal jurisdiction.
How to Report
FinCEN is the information gathering agency. The BOI report must be made electronically through a secure filing system (“portal”) on the FinCEN website. The FinCEN portal is open and accepting 2024 reports.
Necessary Reporting Information
At a minimum you will need to have available the following information in order to complete the BOI report:
- Taxpayer Identification Number;
- legal name; trade names, “doing business as” (d/b/a), or “trading as” (t/a) names;
- current street address of its principal place of business;
- disclosure of beneficial owners; and
- jurisdiction of formation or registration.
The reporting will require names, addresses, birthdates, and an identifying number for each beneficial owner (driver’s license, passport or other document and an image of document used). Determination of who is a “beneficial; owner” of your entity is generally any individual who exercises substantial control; over your company or who owns or controls at least 25% of your entity. These determinations should be made with the assistance of your attorney.
Filing Deadlines
The effective date is January 1, 2024.
Reporting companies created or registered before January 1, 2024, will have one year (until January 1, 2025) to file their initial reports.
Reporting companies created or registered on or after January 1, 2024, and before January 1, 2025, have 90 calendar days after receiving actual or public notice that their company’s creation or registration is effective to file their initial BOI reports. Specifically, this 90-calendar day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.
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.A reporting company will also have to indicate the type of filing it is making (initial report, a correction of a prior report, or an update to a prior report).
Reporting Exemptions
There are 23 categories of entities exempted from filing a BOI report including publicly traded companies, SEC-reporting entities, banks, credit unions, money services businesses, securities brokers and dealers, tax-exempt entities, insurance companies, licensed insurance producers, pooled investment vehicles, public utilities, and accounting firms. Another exemption exists for entities classified as "large operating companies." These should be reviewed thoroughly to determine if an exemption exists.
Substantial additional assistance for filing the BOI report information can be accessed at https://www.fincen.gov/boi.
The Federal requirements may not satisfy state reporting requirements. Recently the New York Legislature and Governor Hochul passed the LLC Transparency Act hat will require domestic and foreign LLCs to report beneficial ownership information to the New York Department of State when they submit a formation or qualification filing or file an amendment. California, Massachusetts and South Dakota are other states that are considering similar reporting requirements. Consulting with your legal team to ensure compliance is critical to mitigating risk.