Update on the Corporate Transparency Act

Effective January 1, 2024, all existing and newly created small business entities will be required to file a beneficial ownership report to the Financial Crimes Enforcement Network (FinCEN) as part of the new Corporate Transparency Act.

This reporting requirement will affect over 32.6 million existing and over 5 million newly created small business entities. All beneficial owners of a small business entity are required to file a Beneficial Ownership Information Report (BOIR) on or before December 31, 2024. Failure to file can result in civil penalties of up to $500/day and criminal penalties of up to two years in prison and/or a $10,000 fine.  

If you are the beneficial owner or have an ownership interest in a small business entity, it is likely that your business entity is required to file a BOIR report. Here are some frequently asked questions regarding the CTA:  

• What entities are required to file a BOIR report? 
  The CTA requires all corporations, limited liability companies, or any other entity created by filing a document with a Secretary of State or similar office under the laws of a State or Indian tribe to file a BOIR. However, there are 23 exceptions to this rule, which include, but are not limited to, the following: non-profit/tax exempt entities, large operating companies with more than 20 full-time employees and more than $5 million in gross receipts and sales, and inactive entities that are not actively engaged in business.  
• Who is a beneficiary owner?  
  The CTA states that any individual who, directly or indirectly, either exercises substantial control over or owns at least 25% of the company is a beneficiary owner. Substantial control includes serving as senior officers or having substantial influence over important decision made by the company.  
• What information is reported? 
  The BOIR requires a reporting entity to provide its full legal name, street address of principal place of business, jurisdiction of formation, and IRS taxpayer identification number. The BOIR requires the beneficial owner to provide the individual’s full legal name, date of birth, current address, Social Security Number, and a form of identification such as driver’s license or passport.  

Fortunately, FinCEN has created a detailed filing guide on their website for all small business entities to navigate through the reporting process. Please visit https://www.fincen.gov/boi for more information, including information regarding whether your small business entity is required to file, how to file, and a link to the BOIR online filing system. If you have any further questions, please reach out to your advisor.