The Corporate Transparency Act

In the ever-evolving landscape of financial regulations, it’s easy for crucial updates to slip under the radar. Today, we shed light on a game-changer that may have gone unnoticed by many tax professionals and their clients – the Corporate Transparency Act (CTA).

Enacted on January 1, 2021, the CTA mandates that both existing and new entities, such as corporations, limited liability companies (LLCs), and others registered with a state, must disclose their Ultimate Beneficial Owners (UBOs). Fast forward to January 1, 2024, and these entities are now required to file Beneficial Ownership Information (BOI) Reports with the Financial Crimes Enforcement Network (FinCEN). The CTA’s primary goal? To combat money laundering, terrorism financing, and the concealment of funds for illicit activities.

Let’s delve into the details. Certain exemptions exist, sparing specific entities from filing a BOI Report:

• This includes regulated companies (e.g., banks, credit unions, insurance companies, SEC reporting companies)
• Companies with over 20 employees and revenue exceeding $5 million
• Dormant companies not engaged in U.S. trade or business owned by U.S. persons, 
• Tax-Exempt Entities.

For reporting companies, the BOI report necessitates disclosing each owner with substantial control, surpassing 25% ownership or control. Notably, minors, agents or nominees, inheritors, or creditors are exempt from this requirement. However, those involved in creating these entities, such as lawyers, CPAs, or their staff, must disclose their information.

The BOI report itself demands a wealth of information – this will include the following: 

• Full legal names
• Dates of birth
• Current addresses
• A unique identifying numbers, and issuing jurisdictions (U.S. passport or driver’s license)
• Including an image of the document containing the identifying number.

Crucially, for companies existing pre-January 1, 2024, the BOI report must be submitted by January 1, 2025. Newly formed companies starting January 1, 2024, and onward have a 90-day window for BOI report submission.

The consequences of failing to file a BOI report are substantial, with penalties ranging from $500 per day up to $10,000, and even the possibility of imprisonment for up to two years. Business owners are urged to entrust these filings to professionals – accountants or attorneys – to avoid penalties for willful non-compliance with FinCEN reporting obligations.

In response to these developments, BOI FI emerges as a valuable ally. Uniquely positioned to assist tax and legal professionals, BOI FI has streamlined the BOI filing process for both domestic and foreign reporting companies. Through a user-friendly questionnaire, business owners can swiftly determine their eligibility for this new filing requirement. With just a few clicks, compliance with the CTA becomes a reality, shielding businesses from potentially costly penalties.

Stay informed, stay compliant, and let BOI FI be your guide in this new era of regulatory requirements.