The Corporate Transparency Act (CTA) introduces expanded anti-money laundering laws and new mandatory reporting obligations for certain U.S. businesses. Starting in 2024, many companies will need to report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN), which operates under the U.S. Treasury Department. The aim of this requirement is to create a national database that will assist law enforcement in preventing the misuse of shell companies for illicit activities, such as money laundering and terrorism financing.
Please note, the information below is general and should not be applied to your specific situation without consulting a legal or professional advisor experienced in CTA reporting requirements.
Which Entities Must Comply with the CTA’s BOI Reporting?
Both U.S. and foreign entities may be required to comply with the CTA’s BOI reporting rules. A company is considered a "reporting company" if it files documents with a secretary of state (SOS) or a similar government office to create or register the entity. This includes corporations (such as S Corporations), limited liability companies (LLCs), or any other entity formed through formal filings with state authorities.
Businesses that do not require formal filings with a secretary of state or equivalent office are generally exempt from these reporting requirements.
Defining a Beneficial Owner
A "beneficial owner" refers to any individual who directly or indirectly:
Exercises substantial control over the reporting company, or
Owns or controls at least 25% of the company's ownership interests.
Filing Deadlines for Companies
The deadline for submitting BOI reports varies based on when the entity was created or registered, or if there has been a change in the beneficial owner’s details. Here's a quick overview:
New entities (created/registered in 2024) — must file within 90 days
New entities (created/registered after 12/31/2024) — must file within 30 days
Existing entities (created/registered before 1/1/24) — must file by 1/1/25
Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports — must file an update or correct prior report within 30 days
What is a FinCEN Identifier?
A FinCEN Identifier (FinCEN ID) is a unique identification number issued by FinCEN. Individuals can apply for a FinCEN ID instead of providing their personal details with each BOI report. This ID is obtained by submitting the same information required of a beneficial owner.
This option can be beneficial for individuals who prefer to share their personal information directly with FinCEN or for those who are required to be reported as beneficial owners or company applicants for multiple reporting companies.
Risks of Non-Compliance
Failing to comply with the BOI reporting requirements can result in significant penalties. Businesses that willfully fail to file or submit inaccurate reports may face civil penalties of $591 per day (up to a maximum of $10,000) and potential criminal penalties, including imprisonment for up to two years.
If you have questions or would like assistance in determining whether the BOI reporting requirements pertain to you and entities that you own, or assistance filing a BOI report, please contact our office.
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