Corporate Transparency Act and Beneficial Ownership Information Reports

Corporate Transparency Act and Beneficial Ownership Information Reports

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Effective 01/01/2024, most small businesses are required to report beneficial ownership information (BOI) to the federal government. The required report is submitted electronically to the US Treasury Financial Crimes Enforcement Network (FinCEN) via their website at www.fincen.gov.

All entities created by filing registration documents (such as articles of organization or incorporation) with a secretary of state or other similar office are reporting Companies. These include corporations, LLCs, Limited Partnerships, Statutory Trusts and Foundations. There are some entities exempt from filing such as banks, tax exempt organizations, securities brokers/dealers, certain large organizations and certain inactive entities.

A beneficial owner is an individual who directly or indirectly either:
1) Exercises “substantial control” over the reporting Company, or
2) Owns at least 25% of the Company.

According to the reporting rules, there are numerous ways an individual can exercise “substantial control” over the reporting Company, which makes that person a beneficial owner subject to reporting.

The BOI report must include the following Company information: name, physical address, state of formation and EIN. It also must include the following personal information of ALL beneficial owners: person’s full name, physical address, DOB and identification number from a state drivers license or US passport. An image of the drivers license or US passport must also be provided.

Entities created before 01/01/2024 have until 01/01/2025 to submit their BOI report. Entities created after 01/01/2024 have 90 days from filing registration documents with the secretary of state to submit their BOI report. In addition, entities created after 01/01/2024 must provide the same personal information about the Company applicant(s) as its beneficial owners. The Company applicant is the person who files the registration documents with the secretary of state.

Penalties for not submitting the BOI report and/or not reporting all beneficial owners can be severe. You can be penalized $500 per day, with no maximum limit, for not filing your BOI report by the deadline. You can also be subject to criminal penalties of imprisonment and up to a $10,000 fine. Thus, it is important to submit your complete BOI report.

A separate report for each reporting Company must be submitted. So, if you own more than one business that is considered a reporting entity, a separate BOI report must be submitted for each.

After the initial BOI report is submitted, any changes to the reporting entity information or changes to a beneficial owner’s information or changes in beneficial owners of a Company must be reported within 30 days. This includes a simple address change of an owner. For example, if a beneficial owner moves rom one residence to another, the address change must be reported within 30 days.

Watch for future communications from our office concerning how we can assist you in preparing required BOI reports. In the meantime, if you have any questions in regard to these reports, please contact our office to discuss.

Read Small Entity Compliance Guide here.

Read Beneficial Ownership Information Reporting Frequently Asked Questions here.