You may have heard about a new law known as the Corporate Transparency Act. If you own all or part of a business, this law could affect you!
In 2021, Congress enacted the Corporate Transparency Act. This law requires certain business entities to file a report with the Financial Crimes Enforcement Network (“FinCEN”), overseen by the U.S. Department of the Treasury regarding their “beneficial owners”. Beneficial owners are those individuals who ultimately own or control the company. The purpose of this Act is to discourage illegal activities such as money laundering, terrorist financing, tax evasion, and other illicit purposes.
If you are subject to the Corporate Transparency Act, you must file a statement of Beneficial Ownership Information (BOI).
Who Must File a BOI Pursuant to the Corporate Transparency Act?
According to FinCEN’s website (www.fincen.gov), your company is likely required to file a report regarding its beneficial owners if:
- It is a corporation, a limited liability company, a limited liability partnership, 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 of Indian tribe; or
- It is a foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing.
When Must You File A BOI?
FinCEN began accepting reports on January 1, 2024. The deadline for filing your beneficial ownership information report is:
- Entities that existed prior to January 1, 2024 will have until January 1, 2025, to file their initial report.
- Entities that were formed between January 1, 2024 and December 31, 2024 must file within 90 days of formation!
- Entities formed after December 31, 2024 must file within 30 days of formation!
Filing is free and can be done at the following web address: www.fincen.gov/boi.
Please note that not all U.S. business entities are required to file this report; there is a list of 23 entity types which are exempt from filing. A list of these types can be found under item C.2 at www.fincen.gov/boi-faqs. (This link is also helpful in answering many other questions.)
Penalties for Failure to File BOI
For those companies required to file a report, there are steep penalties for choosing not to file. As specified in the Corporate Transparency Act, “a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. However, this civil penalty amount is adjusted annually for inflation. A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.”
Is Filing a BOI Statement Difficult?
As a practical matter, as long as your business is owned by individuals (and not a trust or other entity), the online form is generally straightforward. However, the attorneys at our office is happy to answer any questions you may have regarding the Corporate Transparency Act, including whether your entity is required to file, how, where, and when to file, and what is included in the filing itself. When filing yourself, you will be prompted to create a FinCEN Identification number which we suggest you do if you have more than one entity to help streamline your filings. You will also need to provide a government issued photo identification of each beneficial owner when filing. If you are in doubt if you should disclose the existence of a beneficial owner, it is better to provide more information than not enough to avoid any fines.
Additional Reporting (After the Initial Filing)
Once you have filed your initial report, you may need to file an additional report with FinCEN if there is a change in the name of the business, change of ownership, if you or the business moves, or if there is a change in the tax ID number for the business or any of the owners. In those instances, you will need to re-file a new report with FinCEN within 30 days of the change. (Keep in mind, this could apply if you are gifting a piece of ownership to a family member or if an owner passes away.)
Conclusion
As a reminder, the Corporate Transparency Act only affects people who own all or a part of a business (either outright, through a trust, or through another business). Please contact us if you have any questions you may have regarding the Corporate Transparency Act, including whether your entity is required to file, how, where, and when to file, and what is included in the filing itself.
