The Corporate Transparency Act: Short Instructions for NEW Businesses

by | Business Law, Private Client Services

The Corporate Transparency Act (CTA) was enacted in 2021 and aims to fight illicit activities like tax fraud, money laundering, and financing for terrorism. The Act seeks to capture more ownership information for specific U.S. businesses operating in or accessing the country’s market. The CTA was established to prevent individuals with malicious intent from hiding or benefitting from the ownership of their U.S. entities to facilitate illegal activities. The Rule was a sweeping and significant update to the U.S. anti-money laundering laws, estimated to affect over 32 million entities by requiring new reports of Beneficial Owners.

Under the new legislation, all corporations, limited liability companies, limited partnerships, and other entities that were formed with a state’s Secretary of State’s office or formed under the law of a foreign country and registered to do business in the US to file a Beneficial Ownership Information (BOI) Report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), providing details identifying individuals who are associated with the reporting company. The BOI report is required to promote transparency, promote industry standards, and combat financial fraud.

To comply with the Corporate Transparency Act, there are certain details that companies must include in the BOI report. These vary based on the date their business was established. New businesses registered or established after January 1, 2024, must register and provide information regarding the business, its beneficial owners, and its company applicants shortly after formation. This information includes owners’ and applicants’ (if applicable) names, addresses, birthdays, and identification numbers (such as a license or passport number), and the jurisdiction of the documents.

Do I Need To Report?

There are 23 types of companies that are exempt from the BOI reporting requirements. To see if your company is exempt from the BOI reporting, please see the table summary of the 23 exemptions provided by FinCEN at:

When Do I Need To Report?

Businesses created between January 1, 2024, and January 1, 2025, will have 90 days from either the actual notice of formation or public announcement, whichever is first, to file.

Businesses established on or after January 1, 2025, will have 30 days from notification or public announcement of their formation to submit their first report to FinCEN.

After your initial filing, be aware that BOI reporting is not an annual requirement. A report only needs to be submitted once, unless the filer needs to update or correct information.

What Do I Need To Report?

You’ll need to report the following information.

Information about the Company Itself

  1. The Company’s legal name
  2. Any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names
  3. The current street address of its principal place of business if that address is in the United States (for example, a U.S. reporting company’s headquarters), or, for reporting companies whose principal place of business is outside the United States, the current address from which the company conducts business in the United States (for example, a foreign reporting company’s U.S. headquarters);
  4. Its jurisdiction of formation or registration
  5. Its Taxpayer Identification Number (or, if a foreign reporting company has not been issued a TIN, a tax identification number issued by a foreign jurisdiction and the name of the jurisdiction)

Information about the Beneficial Owners of the Company

  1. The individual’s name
  2. The individual’s Date of birth
  3. The individual’s Residential Address
  4. An identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of the identification document
  5. An image of the identification document used to obtain the identifying number in item 4

Please see the full list of items required for the BOI report here.

What If Things Change?

Should any of the initial reported information change or a beneficial ownership interest be sold or transferred, the company must report this information to FinCEN within 30 days of the change or face the potential of having the penalties described above imposed. Changes include reporting a beneficial owner’s change of address or name, a new passport number when a passport is replaced or renewed, or providing a copy of a renewed driver’s license.

You may be surprised by some requirements for updated filings. For instance, if a beneficial owner changes their address, legally changes their name due to marriage or divorce, or obtains a new driver’s license, it may necessitate an update to a company’s BOI report. Operational changes or a new delegation of authority could also qualify.

Where Can Business Owners Get Help with their Beneficial Ownership Information Reports?

Companies may opt to file their own BOI reports or with the assistance of a knowledgeable advisor.

What Happens If I Fail To Report?

Failure to meet the deadline for filing and timely updating any changed information to FinCEN can result in significant fines of up to $500 per day until the violation is remedied, or if criminal charges are brought, fines of up to $10,000 and/or two years imprisonment. These penalties can be imposed against the beneficial owner, the entity, and/or the person completing the report.

Where Can I Learn More?

To learn more about BOI reporting and its requirements, please visit the FinCEN website and thoroughly review the Small Business Compliance Guide. You can also read our detailed blog article.

Read additional details:

The Corporate Transparency Act: Short Instructions for EXISTING Businesses

You can also reach out to our qualified and experienced team. We would happily speak with you about BOI reporting for your new business.