Important Information about the Corporate Transparency Act

All entities formed or operating in the United States should review the requirements. Failure to comply no later than January 1st, 2025 can lead to significant civil and criminal penalties. Learn More Below.

What is the Corporate Transparency Act?

The Corporate Transparency Act (CTA) passed by Congress in 2021, created a federal framework for reporting, storing and disclosing beneficial ownership information of reporting companies. The CTA was enacted as a tool for the government to counter money laundering, the financing of terrorism and other illicit activities.

What changes are starting in 2024?

Starting January 1^st 2024, reporting companies will be affected by the CTA’s disclosure provision. Reporting companies will be required to deliver to the Financial Crimes Enforcement Network (FinCEN) a Beneficial Ownership Report (BOIR) containing information about the reporting company that includes, the entity’s full legal name, trade names, a complete current address, the jurisdiction it was formed in or jurisdiction in which a foreign company first registers, Internal Revenue Service taxpayer identification number and employer identification number. In addition, reporting companies must also provide information to FinCEN about each beneficial owner and company applicant of the reporting company including the following information, full legal name, date of birth, current business or residential address and a unique identifying number from an acceptable identification document (i.e., passport, driver’s license, etc.) or a FinCEN identifier number.

What is a reporting company?

In most cases reporting companies are S corporations, C corporations and limited liability companies. Under the CTA a reporting company is defined as a corporation, a limited liability company or other entity that is 1) formed by filing documents with a secretary of state or similar office of a state or Indian tribe or 2) formed under the law of a foreign country and registered to do business in the United States. While there is an extensive list of companies exempted from the term “reporting company”, filing requirements will still affect a broad range of entities including but not limited to, 1) entities that own real estate assets, entities established by private fund managers that do not meet exemptions related to investment advisers and pooled investment vehicles, 3) individual and family office investment vehicles, and 4) smaller private companies and joint ventures that are not otherwise exempt. 

Who is considered a beneficial owner or a company applicant of a reporting company?

A beneficial owner is defined as any individual who, directly or indirectly either 1) exercises substantial control over a reporting company or 2) owns or controls at least 25% of the ownership interests of the reporting company. Company applicants can only be 1) the individual who directly files the document that creates the entity, or the document that first registers the entity to do business in the United States, or 2) the individual who is primarily responsible for directing or controlling the filing of the creation or first registration document.

Are there exemptions to the Beneficial Ownership Information Report (BOIR)?

The CTA enumerates exemptions that are not required to report to FinCEN. The following businesses are exempt from the BOI report filing rule:

• Large operating companies.
• Inactive entities formed on or before Jan. 1, 2020.
• Entities already regulated by the federal or a state government.

What is the timeline for compliance with the CTA?

The CTA will take effect on January 1, 2024. In order to properly comply with the CTA reporting requirements, entities formed prior to Jan. 1, 2024, must file reports no later Jan. 1, 2025. If there is a change to the information previously submitted to FinCEN, an entity must file an updated report within 30 calendar days of the change occurring. The same applies for any situations where a reporting company becomes aware of an inaccuracy in a report. For entities formed on or after Jan. 1, 2024, reports must be filed within 30 calendar days of when it receives actual notice that its creation has become effective or when the secretary of state or similar office provides public notice of its formation, whichever occurs first. Failure to comply with the CTA reporting requirements can lead to significant civil and criminal penalties, including a maximum civil penalty of $500 per day (up to $10,000) and imprisonment for up to two years.

How to file you initial Beneficial Owner Information Report

Here at Swaim Carlow & Ames, P.C., we find it useful to remind our business clients to maintain the proper tax treatment and legal formalities to safeguard limited liability for their Limited Liability Companies, S-Corporations and C-Corporations.

Now that you have a basic understanding of how the Beneficial Ownership Information Report (BOIR) under the Corporate Transparency Act (CTA) will affect your business here some step to assist you in the process.

1. Your company is required to fill this report out. This is not something Swaim, Carlow & Ames, P.C. can fill out for your company.
2. The Report may be filed using the following link  – https://boiefiling.fincen.gov/
3. FinCEN gives you the option of filing online or Filing a PDF
4. You can create a FinCEN ID if you would prefer to not submit information about an individual. However, an individual or reporting company is not required to obtain a FinCEN identifier.
5. An individual beneficial owner or company applicant’s FinCEN ID can be reported instead of required information about that individual on the reporting company’s Beneficial Ownership Information Report (BOIR) submitted to FinCEN.
6. To obtain a FinCEN ID for yourself, click the Create Account button to create an account and begin the application for a FinCEN ID. If you already have an account, login in to enter your identifying information on the FinCEN ID application.
7. The following link will take you to the homepage where you can create a FinCEN ID – https://fincenid.fincen.gov/landing
8. Once your BOIR is prepared, press submit
9. Upon submission download your BOIR transcript