Beneficial Ownership Information Reporting
The Corporate Transparency Act (CTA), enacted by Congress on Jan. 1, 2021, as part of the National Defense Authorization Act for Fiscal Year 2021, P.L. 116-283, introduces a filing requirement for many entities beginning in January 2024.
The purpose of the CTA is to increase transparency about who owns or controls an entity. Congress believes that illicit actors use U.S. entities to launder money for various illegal activities.
The CTA is designed to combat this and make it easier for law enforcement to track criminal activity by requiring certain types of entities to file a beneficial ownership information (BOI) report with Treasury’s Financial Crimes Enforcement Network (FinCEN).
To know whether these requirements apply to your company, you need to understand what a beneficial owner is and what the beneficial ownership information report contains.
The Financial Crimes Enforcement Network (FinCEN) is a bureau of the U.S. Department of the Treasury. Established in 1990, FinCEN's primary role is to safeguard the financial system from illicit use, combat money laundering, and promote national security through the collection, analysis, and dissemination of financial intelligence.
FinCEN works closely with law enforcement agencies, intelligence agencies, financial institutions, and regulatory entities. It implements and enforces compliance with certain parts of the Bank Secrecy Act, including the requirement for financial institutions to report suspicious activities that might signify money laundering, tax evasion, or other financial crimes.
FinCEN also plays a crucial role in fighting terrorism by tracking and cutting off sources of funding for terrorist activities. It achieves this by analyzing financial transactions and sharing this information with domestic and international partners.
Beneficial owners are individuals who directly or indirectly exercise substantial control over the company or who own or control at least 25% of ownership interest of the company
Beneficial Ownership Information reports will be accepted starting January 1, 2024
Companies registered or created prior to January 1, 2024, will have until January 1, 2025, to submit their BOI report
Companies created or registered after January 1, 2024, and before January 1, 2025 must report their BOI within 90 days
Companies created or registered on or after January 1, 2025 will have 30 calendar days from creation or registration to file their initial BOI reports
Certain entities are exempt from BOI reporting requirements, including publicly traded companies, not-for-profits and certain large operating companies
Companies required to report are called reporting companies. Reporting companies may have to obtain information from their beneficial owners and report that information to FinCEN.
Your company may need to report information about its beneficial owners if it is:
A corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe; or
A foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing.
There are 23 types of entities that are exempt from the BOI reporting requirements. Some of these entities include publicly traded companies, banks, not-for-profits, and certain large operating companies. These "large" companies are defined as organizations that:
Employ more than 20 full-time employees in the United States,
Have an operating presence in the United States at a physical office, and
Filed a United States Federal income tax or information return for the previous year reporting over $5 million in gross receipts or sales, excluding gross receipts from sources outside the United States siness in any U.S. state or Indian tribe by such a filing.
For each beneficial owner, the reporting company will need to provide the beneficial owner's:
All potential reporting companies should start preparing for the CTA by:
Identifying beneficial owners and collecting their relevant information
Reviewing CTA guidance materials and regulations provided by FinCEN
Creating and implementing procedures and internal policies to comply with the CTA
Consulting with professional advisors to ensure compliance and avoid any penalties
Failing to meet your BOI reporting requirements may subject you to FinCEN penalties. Remember that the reports, and the CTA in general, exist to quash crimes, including money laundering, tax evasion, and terrorist financing.
The potential penalties include the following for reporting violations:
A civil penalty of $500 per day for every day that a reporting violation occurs or continues, up to $10,000.
Imprisonment of up to two years for continued reporting violations.
There are also penalties for use violations and the unauthorized disclosure of information in a BOI report, as follows:
Payment of a fine up to $250,000.
Imprisonment of up to five years.
Furthermore, if a violation accompanies the breaking of other laws and establishes a pattern of illegal activity involving $100,000 or more within 12 months, you could be in bigger trouble. In that case, you may receive an enhanced financial penalty of up to $500,000 and imprisonment of up to 10 years.
The new BOI Reporting guidelines should be taken seriously. The penalties for willfully incorrectly filing — or completely failing to file — a BOI report are severe.
One-time filing
Beneficial Ownership Information Report (BOIR)
Get your BOIR filed by us. We'll send your info to FinCEN so you comply with the new rule under the Corporate Transparency Act.