U.S. Congress has passed the Corporate Transparency Act (CTA) that requires small businesses to file a Beneficial Ownership Information (BOI) Report with the Financial Crimes Enforcement Network (Fin CEN) of the U.S. Treasury.
Who Needs to File: Every corporation and LLC, unless exempt, must file a BOI report. Foreign reporting companies registered to do business in the U.S. are also covered.
Exemptions: While there are 23 exemptions, they primarily apply to entities already highly regulated by the government. Most small businesses will not qualify for these exemptions. Noteworthy is the large operating company exemption, applicable to entities employing more than 20 full-time employees in the U.S. with an operating presence and must have filed a Federal income tax or information return in the United States for the previous year demonstrating more than $5 million in gross receipts or sales not to have to report.
What does a company have to report? Companies report their Beneficial Owners, the individuals exercising substantial control or owning at least 25% of the reporting company's ownership interests. They are considered beneficial owners—for example, senior officers, President, CEO, CFO, COO, and General Counsel.
Preparing for Reporting: Businesses should assess and identify beneficial owners and those with substantial control over the company and have images of a photo ID for them, like a U.S. Passport or Driver's License; those will need to be uploaded/attached to the report.
Filing Process: All BOI reports are filed electronically with FinCEN. Options include direct filing on FinCEN's portal, submitting a 4-page PDF through the portal, or using third-party service providers.
Filing Deadlines: Companies created after the first of this year must file within 90 days of creation; however, reporting companies created before January 1, 2024, do not have to file their initial BOI report until January 1, 2025. Ongoing updates are required for changes in information like changes in beneficial owners, operating names, etc.
Penalties for Non-Compliance: Willful violations may result in civil penalties of up to $500 per day, criminal penalties of imprisonment, and fines.
For more information and to file your BOI report, please visit https://www.fincen.gov/boi.