The Corporate Transparency Act (CTA) officially took effect on January 1, 2024, aiming to curb the misuse of business entities in the United States. This new law mandates that companies report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). This move is part of a global trend towards greater transparency and accountability in corporate practices.
The report used to submit this information is known as the BOI Report (Beneficial Ownership Information). The deadlines for filing the BOI Report with FinCEN are:
The initial BOI Report must be filed by January 1, 2025.
The initial BOI Report is due within 90 calendar days from the company's registration or formation.
The initial BOI Report must be filed within 30 calendar days from the company's registration or formation.
FinCEN outlines two types of “reporting companies” required to file a BOI Report:
Domestic Reporting Companies
These include corporations, limited liability companies, and other entities created or registered in the U.S. by filing a document with the Secretary of State or a similar office.
Foreign Reporting Companies
These are entities (including corporations and limited liability companies) formed under foreign law but registered to do business in the U.S. by filing a document with the Secretary of State or a similar office.
These categories cover almost all companies operating in the U.S., though many heavily regulated entities are exempt from these reporting requirements.
There are 23 types of entities exempt from the BOI Report. Most of these are already regulated and provide the required information about their beneficial owners in other documents. Examples include banks, credit unions, insurance companies, accounting firms, and large operating companies (those with more than 20 employees, a physical office in the U.S., and over $5 million in gross receipts and sales in the previous year). As a result, the BOI Report primarily affects small businesses.
Beneficial owners are individuals who have ownership in companies, investments, properties, or other assets, even if their names do not appear on the official titles. According to the Corporate Transparency Act, a beneficial owner is anyone with at least a 25% ownership stake in the company or anyone who exercises “substantial control” over the company, such as senior officers and key decision-makers. Both criteria must be considered to determine if someone qualifies as a beneficial owner.
What happens if my company does not file a BOI report by the deadline?
Failure to file can result in civil penalties starting at $500 per day after the January 1, 2025, deadline. For willful non-compliance, the maximum civil penalty is $10,000, and there could also be criminal penalties of up to two years in prison.
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