The Corporate Transparency Act is now in effect. It is essential you understand the potential impact this may have on your business.

What is the Corporate Transparency Act?

The Corporate Transparency Act (CTA) was enacted in 2021 to combat illicit business activities, such as tax fraud, money laundering, financing terrorism, and more. The CTA also aimed to prevent individuals with malintent from hiding or benefitting from the ownership of U.S. entities to engage in illegal operations.

To achieve this, the new legislation requires businesses that meet certain criteria must submit a Beneficial Ownership Information (BOI) Report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) and provide details identifying individuals who are associated with the reporting company.  This is not part of the tax code or a requirement of the IRS.

Are there any exemptions from the filing requirements?

There are 23 categories of exemptions. Included in the exemptions list are publicly traded companies, banks and credit unions, securities brokers/dealers, tax-exempt entities and certain inactive entities, among others. Please note these are not blanket exemptions and many of these entities are already heavily regulated by the government and thus already disclose their BOI to a government authority.

In addition, certain “large operating entities” are exempt from filing. To qualify for this exemption, the company must:

1. Employ more than 20 people in the U.S.
2. Have reported gross revenue (or sales) of over $5M on the prior year’s tax return; and
3. Be physically present in the U.S.

In other words, if an entity falls below these thresholds, they are required to report.

Who is a Beneficial Owner of a Company?

Any individual who directly or indirectly has significant ownership stake in a company is considered a beneficial owner.

The individual can:

• Own at least 25% of the company’s shares
• Have major influence on the reporting company’s decisions or operations even though they have no ownership interest
• Have a similar level of control over the reporting company’s equity

What Information About Beneficial Owners Must Be Reported?

Required beneficial owner information varies based on the date the reporting company was established.

All reporting companies must declare:

• Legal name
• Tradenames (if any)
• Current U.S. address, which can be either the address of the main business site or the U.S. operational location, if foreign based
• Taxpayer identification number
• Jurisdiction of where the reporting company was formed
• Beneficial owners

Businesses registered or established after January 1, 2024, must also report company applicants, including owners’ and applicants’ names, addresses, birthdays, and identification numbers, and the jurisdiction of the documents.

Currently, there are no annual reporting requirements, but this initial reporting period is not the only time businesses will be required to submit information. If there are changes to your business resulting in shift in decision makers, influence or stake certain employees have, these changes necessitate an updated BOI report. Additionally, if a beneficial owner changes their percentage ownership, name due to marriage, gets a new driver’s license or has an address change, for example, that too, requires an updated report.

Who Has to Report Beneficial Owners?

There are two types of businesses required to submit BOI reports:

• Domestic reporting companies, including LLCs, corporations, and other entities formed by filing through the Secretary of State or similar office in the U.S.
• Domestic entities that are not created by the filing of a document with a secretary of state or similar office are not required to report under the CTA.
• Foreign reporting companies that are registered to conduct business in the U.S. by filing through the Secretary of State or similar office in the U.S.

How Do You Report Beneficial Owners?

BOI reports must be submitted electronically through FinCEN: https://boiefiling.fincen.gov/. To download a copy of the BOI form, click here: https://boiefiling.fincen.gov/fileboir

There is no fee for submitting your beneficial ownership information to FinCEN.

When Do I Need to Complete My BOI Reports?

Deadlines for BOI report completion varies based on when the business was created or registered:

• 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.
  • The 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 with FinCEN.

Risk of Non-compliance

Penalties for willfully not complying with the BOI reporting requirement can result in criminal and civil penalties of $500 per day and up to $10,000 with up to two years of jail time.

How Do You Report Beneficial Owners?

Self-preparing:

• BOI reports must be submitted electronically through FinCEN: https://boiefiling.fincen.gov/. To download a copy of the BOI form, click here: https://boiefiling.fincen.gov/fileboir

There is no fee for submitting your beneficial ownership information to FinCEN.

Rely on a lawyer to prepare these for you by contacting:

• Your legal counsel
• Your Corrigan Krause representative or email BOI-Team@corrigankrause.com for a law firm referral