The Corporate Transparency Act (CTA) was recently signed into law as part of the National Defense Act for Fiscal Year 2021, bringing about significant changes to the disclosure requirements for many businesses in the United States. It mandates that millions of business entities report their Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN). In this article, we aim to address some of the most commonly asked questions about the CTA.
As we approach 2024, the deadline for existing entities to comply with the Corporate Transparency Act (CTA) draws near – see reporting deadlines below. Businesses across the United States are preparing to meet the CTA’s requirements, which center around the reporting of Beneficial Ownership Information (BOI).
BOI Reporting Requirements?
All domestic and foreign entities established or registered to conduct business in the United States are obligated to submit the BOI report unless they qualify for any of the 23 exceptions. Domestic entities include corporations, limited liability companies, or other structures created by filing documentation with a state secretary’s office or similar authority in accordance with U.S. state or Indian tribal laws. Foreign entities, on the other hand, are entities formed under laws of a foreign country that are registered to conduct business in any U.S. state or tribal jurisdiction.
Several exceptions apply, including entities with over 20 employees, those with a gross revenue exceeding $5 million in the preceding year, and those with a physical presence in the United States. Publicly traded companies registered under Section 102 of the Sarbanes-Oxley Act are also exempted.
Key BOI Reporting Deadlines
The BOI reporting mandate commences from January 1, 2024. The filing deadlines are as follows:
- For new companies formed or registered after December 31, 2023 – the report must be filed within 90 days of formation. A Notice of Proposed Rulemaking has extended this deadline from the initial 30-day window for entities formed or registered in 2024 alone. However, the rule remains unchanged for entities formed or registered from January 1, 2025, which must file a BOI report within 30 days of formation.
- For existing entities formed or registered prior to January 1, 2024 – the report must be filed by January 1, 2025.
- For entities with modifications to previously reported data – such as ownership, address, etc. – the updated report must be filed within 30 days of the change or discovery of inaccuracy.
Sanctions for Non-compliance
Non-compliance with the BOI reporting requirements can lead to civil and criminal penalties. Civil penalties may reach up to $500 per day, while criminal penalties can lead to up to two years of imprisonment and/or a fine of up to $10,000.
Information Required for BOI Reporting
Entities must report specific entity-related and owner-related information. For the entity, this includes its legal name, any trade or “doing business as” names, business address, state or tribal jurisdiction of formation, and IRS taxpayer identification number. For the beneficial owners, the report must include their names, birthdates, addresses, and an image of a document with a unique identifying number, such as a non-expired U.S. passport or state driver’s license.
BOI Reporting Conclusion
The enforcement of the CTA’s BOI reporting requirements in 2023 represented a major milestone in the ongoing quest for corporate transparency in the United States. As we move into 2024 and beyond, it is crucial for businesses to remain vigilant in their compliance efforts and adapt to the evolving regulatory landscape. With the aid of technology and a proactive approach to corporate governance, businesses can navigate this new environment successfully and contribute to a transparent and accountable corporate America.
What You Should Do Now
Don’t panic! While this legislation adds considerable compliance requirements and penalties for non compliance, here are a few things you can do to prepare.
Contact your attorney and review the requirements and determine if they will be preparing these forms for their clients. At this time, accountants are NOT able to prepare these forms. We will, however, be involved in assisting you or your attorney to prepare the forms.
Compile all the information that will be required for the filing. This includes names, addresses, social security numbers and other identification for all beneficial owners.
Then WAIT. The AICPA and lobbyists have called on Congress to delay the implementation of this legislation for at least 1 additional year so that the rules can be clarified. In addition, we would advise that you delay the filing as long into 2024 as you can. Any modifications after the initial filing will require an updated report to be filed within 30 days. In filing as late in the year as possible, you reduce the chance for any additional filings in 2024.