The Corporate Transparency Act (CTA) became a significant piece of legislation in fiscal year 2021 as part of the National Defense Authorization Act. It was created to combat money laundering, the financing of terrorism and other illicit activities. The CTA aims to enhance business transparency by requiring the disclosure of information about beneficial owners.

On January 1, 2024, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) began accepting beneficial ownership information (BOI) reports. Here’s a quick look at what you need to know.

Which businesses have to report BOI?

Not all companies are required to report BOI; some companies are required to report only if they meet the definition of a reporting company. Your business may qualify as a reporting company if it meets one of the following requirements:

• The company is a corporation.

• The company is a limited liability (LLC).

• The company was created by the filing of a document with a secretary of state or any similar office under the law of a state or Native American tribe.

• The company is registered to do business in any US state or Native American tribal jurisdiction by filing a document with a secretary of state or similar office of the state or tribe.

For updated information and a list of exemptions, refer to the Small Entity Compliance Guide.

Who are beneficial owners?

A beneficial owner is any individual who directly or indirectly:

• Exercises substantial control over a reporting company; OR

• Owns or controls at least 25% of the ownership interests of a reporting company.

A reporting company may have multiple beneficial owners; no maximum number must be reported.

What information must be disclosed, and who can access the BOI?

Reporting companies are required to submit accurate and current beneficial ownership to FinCEN. The following information must be included:

• The full legal name of the reporting company, including any trade name; complete current US address; state, tribal or foreign jurisdiction of formation; IRS taxpayer identification number (TIN), including an employer identification number (EIN).

• The full legal name, date of birth, and residential or business address of each beneficial owner.

• A unique identification number from an acceptable identification document (e.g., driver’s license, passport) for each beneficial owner.

FinCEN permits federal, state, local and tribal officials to obtain BOI for authorized activities related to national security, intelligence and law enforcement. Foreign officials who submit a request through a US federal government agency may also gain access. Financial institutions have access to BOI in specific circumstances only with the consent of the reporting company.

When does your business need to disclose?

If your company existed before January 1, 2024, it must file its initial BOI report by January 1, 2025. If your company is created between January 1, 2024, and December 31, 2024, it must file its initial BOI report within 90 days.

If there are any changes to the reporting company or any of its beneficial owners, your company has 30 days to file an updated BOI report with FinCEN. Changes may include:

• Any change to the information reported for the reporting company, like registering as a new DBA (doing business as).

• A change in beneficial owners, such as a new chief executive officer, the death of a beneficial owner or a sale that changes who meets the ownership interest threshold.

• Any change to a beneficial owner’s name, address or unique identifying number.

How are BOI reports submitted, and is there a fee?

If your business is required to report your BOI, you can use the secure filing system available on FinCEN’s website and refer to their quick reference guide and step-by-step instructions. There is no fee for submission.

What happens if a reporting company fails to report or submit correct information?

Anyone who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 per day the violation continues and may also be subject to criminal penalties of up to two years imprisonment, along with a fine of up to $10,000.

Summing it up

If you need more information regarding the BOI reporting requirements or have concerns about reporting on your own, visit the FinCEN website. You may also visit their FAQ page, start a chat and stay current on FinCEN updates by subscribing to their email list. Remember, it’s up to you to remain compliant with the CTA; consider consulting with your legal counsel on BOI reporting requirements.