Business owners note that the Corporate Transparency Act (CTA) may require you to report ownership information to the Federal Government.
What is the Corporate Transparency Act?
The CTA went into effect on January 1, 2024, and is designed to capture U.S. business ownership information as a way to combat activity such as tax fraud and money laundering. The CTA requires businesses meeting certain criteria to submit a Beneficial Ownership Report (BOI) to FinCEN, the Department of the Treasury’s Financial Crimes Enforcement Network. The BOI provides details about the “beneficial owners” of the company.
Under the CTA, beneficial owners are those who have a significant stake in the ownership of the company. For example, they own over 25% of company shares or influence the company’s operations or decision-making. However, some individuals are not considered beneficial owners, for example, minors, employees who are not senior officers and do not hold shares in the company, and those who are considered future inheritors of the company.
Note that not all companies are required to submit a BOI. Currently, two types of companies are required: domestic reporting companies (LLCs, corporations, trusts, and entities formed through a Secretary of State or other comparable body), and foreign reporting companies conducting business in the U.S., having registered to do so through a Secretary of State or comparable body. Sole proprietorships without a single-member LLC are not required to file.
There is no fee to submit a BOI.
What Information Must be Provided?
The information that must be provided on the BOI – and when this information must be provided – depends on when the business was established. Businesses established on or after January 1, 2024, must provide basic information about the business, “beneficial owners,” and “company applicants,” including addresses and ID documents. Taxpayer ID numbers, operational location, and the jurisdiction of formation must also be provided.
Companies formed between January 1, 2024, and January 1, 2025, will have 90 days from formation to file their BOI. Companies formed after January 1, 2025, will have 30 days to do so. Reporting companies formed prior to January 1, 2024, will have until January 1, 2025, to file.
So far, annual reporting is not required, but company owners are required to file updates when names, addresses, ID numbers, or operational changes occur – for example, a merger or acquisition takes place, or a person is hired who may have influence over the business operations, even if they do not own shares in the business.
Businesses that don’t file or update their CTA reports by the required deadlines may face civil or criminal charges.
Unsure about your BOI Reporting Responsibilities? Talk to Warner PLLC
While companies are able to file their own BOI forms, we recommend consulting with an advisor before filing or updating your forms. Warner PLLC can help you identify who may be considered a “beneficial owner” and will help you file your BOI on time and in accordance with FinCEN’s requirements; we can also help keep you apprised of updates to the Corporate Transparency Act ruling. For more information about your BOI reporting responsibilities, talk to us today.
