The New Corporate Transparency Act(CTA) Requires New Reporting Obligation For Business Owners

Before January 1, 2025, businesses have a new reporting obligation to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
If you’re starting a new business this year, you will be required to report. If you’ve been in business for years or decades, you will be required to report. What you must submit is beneficial ownership information (BOI). According to the recently released report, a beneficial owner is “an individual who exercises substantial control over the company or who owns or has control over at least 25% of its ownership interests.” There is also no set maximum limit on the number of beneficial owners a business has.

Additional information is required for businesses created after January 1, 2024. These newly formed business must also provide personal details about the “company applicant.” This refers to the individual who files the document to create a domestic company or register a foreign (non-United States) company. And, if there is another individual beside the applicant mainly responsible for overseeing or controlling that filing, information must be provided about that person too.

The CTA Objective

The goal of the Corporate Transparency Act (CTA) is to address illicit activities, like money laundering and tax evasion, by gathering additional information about the ownership of specific entities operating in or engaging with the U.S. market. There are substantial penalties and fines for not filing

Businesses That Are Required To Report

Existing companies: An existing company is an LLC, corporation, or other entity created or registered to do business by filing a document with a secretary of state or similar office, that was created or registered before January 1, 2024. If your company falls within this bracket, it must file an initial BOI report by January 1, 2025.

New companies:
A new reporting company is an LLC, corporation, or other entity created or registered by filing a document with a secretary of state or similar office that was created or first registered on or after January 1, 2024, and before January 1, 2025. If this is your company, it must file an initial BOI report within 90 calendar days after receiving notice of the company’s creation or registration (actual or public notice).

Businesses Created on or after January 1, 2025
Any LLC, corporation, or other entity created or registered on or after January 1, 2025 will have 30 calendar days after receiving notice of the company’s registration to file a BOI report.

Certain Businesses Are Exempt From The CTA

There are 23 exemptions. Most are for companies that are already subject to substantial federal or state regulation under which their beneficial ownership may already be known. This includes, among others, entities that file reports with the SEC, governmental authorities, banks, credit unions, money services businesses, investment advisors, securities brokers and dealers, tax exempt entities, entities assisting tax exempt entities, insurance companies, state-licensed insurance producers, pooled investment vehicles, public utilities, inactive entities, subsidiaries of certain exempt entities, accounting firms, and large operating companies.

Penalties For Failing To File BOI

You don’t want your business to be caught unaware of these new filing requirements. It can get very expensive as there are penalties for failing to file. As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to a civil penalty of up to $591 for each day that the violation continues. For more information about the CTA go to https://www.fincen.gov/boi

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