If you're a business owner, you may have heard about the new Beneficial Ownership Information (BOI) reporting requirements under the Corporate Transparency Act (CTA). As your trusted advisor, I'm here to break down what this means for you and guide you through the process to ensure compliance. Let's dive into the background of these requirements and what steps you need to take to stay on the right side of the law.
Background on BOI Reporting
The Corporate Transparency Act, effective from January 1, 2024, aims to combat financial crimes by requiring certain businesses to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Beneficial owners are individuals who own or control 25% or more of a company, either directly or indirectly. This information is crucial for increasing transparency and reducing illegal activities such as money laundering and fraud.
Most small to mid-sized businesses, including corporations, LLCs, and other entities formed by filing with a state, fall under these reporting requirements. However, there are exemptions for certain entities like banks, credit unions, and inactive companies. If you're unsure whether your business needs to comply, it's essential to review these rules or consult with us.
Who Is Required to File and Who Is Exempt?
Under the Corporate Transparency Act, most small to mid-sized businesses need to file a Beneficial Ownership Information (BOI) report. Here’s a breakdown of who must comply and who is exempt:
Who Is Required to File?
If your business falls into any of the following categories, you’re likely required to submit a BOI report:
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Corporations – Any corporation formed under U.S. state or tribal law.
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Limited Liability Companies (LLCs) – LLCs created in the United States.
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Limited Partnerships (LPs) and Limited Liability Partnerships (LLPs) – These entities are also subject to the reporting requirements.
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Foreign Entities – Any foreign entity that is registered to do business in the U.S. must comply.
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Other Entities – Any business formed by filing a document with a U.S. state, tribal jurisdiction, or other authorities, such as business trusts or similar entities.
Who Is Exempt?
Certain types of businesses are exempt from BOI reporting due to their existing regulatory oversight or specific characteristics. Exempt entities include:
- Large Operating Companies – Entities with over 20 full-time employees, more than $5 million in gross receipts, and a physical operating presence in the U.S.
- Banks and Credit Unions – Financial institutions already subject to significant federal oversight.
- Investment Companies – Registered investment advisers and other regulated investment entities.
- Publicly Traded Companies – Companies that are already required to disclose ownership information to the SEC.
- Inactive Entities – Entities that were in existence on or before January 1, 2020, that are not engaged in active business and have no ownership changes.
If your business falls into an exempt category, you’re not required to file a BOI report. However, if you’re unsure whether your company qualifies for an exemption, it’s wise to consult with a professional to avoid potential penalties for non-compliance.
Key Filing Requirements:
To comply with the BOI reporting requirements, you’ll need to gather the following information for each beneficial owner (25% owners) and company applicant (those who file the report):
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Personal Information:
- Full legal name
- Date of birth
- Current residential address
- A unique identifying number from an acceptable ID (e.g., passport, driver’s license)
- An electronic image of the ID
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Company Information:
- Full legal name of the business
- Trade name (if applicable)
- U.S. address
- State of formation
- Taxpayer Identification Number (TIN or EIN)
How to File:
You have two options for filing your BOI report: online through FinCEN's website or via a downloadable PDF form. Here’s a quick rundown of the steps:
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Prepare Your Documents: Gather the above information from the Key Filing Requirements section
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Download the Form: Visit this link to download the PDF form if you prefer to file offline.
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Complete the Form:
- Fill out all required sections, including details about your business, beneficial owners, and any company applicants.
- Attach scanned copies of the required identification documents.
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Validate and Finalize: Ensure all the information is correct by using the 'Validate' button, then finalize the form to lock it for submission.
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Submit the Report: Once finalized, upload and submit the form directly through the FinCEN BOI E-Filing System. Don’t forget to download the confirmation receipt for your records.
Deadlines & Compliance:
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Existing Businesses (formed before January 1, 2024): You have until January 1, 2025, to file your initial BOI report.
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New Businesses (formed after January 1, 2024): You must file within 90 days of formation.
It’s crucial to stay compliant to avoid hefty penalties, which can include fines of up to $10,000 and even imprisonment for serious violations.
Need Help?
This process can seem overwhelming, but you don’t have to tackle it alone. Whether you need assistance gathering the necessary information, filing the report, or understanding the implications for your business, we’re here to help. Let’s ensure you’re fully compliant so you can focus on what you do best—growing your business.