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Do you currently own an LLC or Corporation? Are you planning on starting an LLC or Corporation? If so, you need to know about the Corporate Transparency Act (“CTA”). The CTA is a new compliance act for business owners, which began on January 1, 2024. It is anticipated that over 30 million small businesses will be required to file a Beneficial Ownership Information (BOI) form about the ownership structure of their business. Failure to comply with this reporting could result in hefty penalties.
Beneficial ownership information refers to the identification of individuals who ultimately own or control a company, either directly or indirectly. This information helps by providing insights into the ownership structure and preventing the misuse of corporate structures for illicit purposes. Money laundering, tax evasion, and fraud are significantly impeded when beneficial ownership information is readily available. Without BOI reporting, shell companies and front companies are set up in the United States by criminals to perform illicit activities in the United States. These criminals are accessing the US financial system and performing financial transactions within the same. Although shell companies can be legitimate, there are also shell companies set up for illicit purposes such as tax evasion, money laundering, etc. BOI reporting will help level the playing field by making it a requirement to report ownership. This transparency not only safeguards the interests of stakeholders but also fosters trust in the business community. Investors, consumers, and partners are increasingly valuing businesses that operate with integrity and openness, and beneficial ownership information reporting serves as a foundation for building this trust.
Who must report?
Many small businesses must file a BOI form. Companies that are required to file are called reporting companies. FinCEN expects 32 Million businesses to be required to file a BOI form. Companies that are required to file are called reporting companies. There are certain narrow exemptions for filing include, but are not limited to, publicly traded companies, nonprofits, and certain large operating companies. To explore further some of these narrow exemptions set up a time to meet with one of STP's Tax Professionals for a consult.
Who are you reporting to?
Reporting companies will be reporting to the Financial Crimes Enforcement Network (FinCEN). The BOI form is to be completed electronically though FinCEN’s website.
When do you report?
If you do not meet the reporting deadlines, you could be subject to penalties. Some penalties include a $500 fine per day for the company or in some instances imprisonment. According to FinCEN, the reporting deadlines are as follows:
- If your company was created or registered prior to January 1, 2024, you will have until January 1, 2025, to report BOI.
- If your company was created or registered on or after January 1, 2024, and before January 1, 2025, you must report BOI within 90 calendar days after receiving actual or public notice that your company’s creation or registration is effective, whichever is earlier.
- If your company was created or registered on or after January 1, 2025, you must file BOI within 30 calendar days after receiving actual or public notice that its creation or registration is effective.
Any time there is a change such as reporting company information or individuals personal information such as name or address, you are required to update your report within 30 days of the change.
Next Steps:
If you believe the CTA might apply to you, or if you are unsure, reach out to our firm. We will provide you with an analysis on whether or not the reporting requirements apply to your company as well as aid in the process. For more information on the CTA and BOI reporting, please visit FinCEN’s website: https://www.fincen.gov/boi
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