Business Owners Beware: New Filing For 2024
Business Owners Beware: New Filing For 2024
If you're a business owner, you may be required to file the Beneficial Ownership Information Report (BOIR) under the Corporate Transparency Act (CTA). Effective January 1, 2024, certain types of U.S. and foreign entities must report beneficial ownership information of those who own or control a company to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. Congress enacted the CTA as part of the National Defense Act for Fiscal Year 2021.
The CTA falls under the Bank Secrecy Act, which necessitates record-keeping and report filing for specific financial transactions. Unlike IRS filings, BOI reports under the CTA are submitted to the Financial Crimes Enforcement Network (FinCEN), a division of the Department of the Treasury.
What entities are required to comply with the CTA's BOI reporting requirement?
Domestic companies, such as corporations, limited liability companies (LLCs), and similar entities created by state or tribal filings, must report, while those not formed through such processes are exempt. Foreign companies formed under foreign law and registered to do business in the U.S. must also comply.
While there are 23 categories of exemptions, including publicly traded companies, banks, credit unions, and certain inactive entities, large operating entities can also be exempt based on specific criteria, such as employing over 20 people in the U.S. and reporting substantial revenue.
Are there any exemptions from the filing requirements?
In addition to unincorporated entities, there are 22 categories of exemptions. Due to other reporting requirements, publicly traded companies, banks, credit unions, securities brokers/dealers, public accounting firms, and tax-exempt entities are exempt. These entities are already heavily regulated by the government and thus 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:
- Employ more than 20 people in the U.S.
- Have reported gross revenue (or sales) of over $5 million on the prior year's tax return
- Be physically present in the U.S.
Who is a beneficial owner?
Any individual who, directly or indirectly, either:
- Exercises "substantial control" over a reporting company, or
- Owns or controls at least 25 percent of the ownership interests of a reporting company
An individual has substantial control of a reporting company if they direct, determine or exercise substantial influence over important decisions of the reporting company. This includes any senior officers of the reporting company, regardless of formal title or if they have no ownership interest in the reporting company.
The detailed CTA regulations define the terms "substantial control" and "ownership interest" further.
When must companies file?
There are different filing timeframes depending on when an entity is registered/formed or if there is a change to the beneficial owner's information.
- New entities (created/registered in 2024) — must file within 90 days
- New entities (created/registered after 12/31/2024) — must file within 30 days
- Existing entities (created/registered before 1/1/24) — must file by 1/1/25
- Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports — must file within 30 days
What information is required to be reported?
Companies must report the following information: full name of the reporting company, any trade name or doing business as (DBA) name, business address, state or tribal jurisdiction of formation, and an IRS taxpayer identification number (TIN).
Additionally, information on the beneficial owners of the entity and for newly created entities, the company applicants of the entity is required. This information includes — name, birthdate, address, and unique identifying number and issuing jurisdiction from an acceptable identification document (e.g., a driver's license or passport) and an image of such document.
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.
The CTA raises awareness of the importance of transparency and accountability in business ownership. By understanding and meeting these requirements, businesses contribute to efforts combatting money laundering, terrorism financing, and illicit activities, ultimately fostering a more secure and ethical business environment. If you have questions regarding your specific situation, consult with a qualified legal advisor or another professional.
Reporting Resources
- https://www.fincen.gov/boi.
- https://inbiz.in.gov/BOI/