WASHINGTON, D.C.– As of Jan. 1, 2024, the Corporate Transparency Act requires small businesses across the nation to file a Beneficial Ownership Information Report with the U.S. Department of Treasury’s Financial Crimes Enforcement Network.
The requirements augment the Bank Secrecy Act of 1970 and for the first time establish a federal requirement to identify beneficial owners of certain legal entities with the expectation of improving anti-money laundering efforts.
Every corporation, LLC, or entity created by filing a document with a Secretary of State or similar office under the law of a state or Tribal Authority is required to file a Beneficial Ownership Information (BOI) Report unless it is one of the 23 categories of exempted legal entities.
The majority of the exemptions are for organizations that already have federal or state reporting requirements including publicly traded companies, banks and credit unions, securities brokers and dealers, tax-exempt entities, insurance companies, public utilities, and accounting firms details Stephanie Barclay, a Partner at Carmel & Naccasha LLP.
Additionally, there is an exemption for a large operating company that meets the following requirements:
- Employs more than 20 full-time employees in the United States
- Holds an operating presence at a physical office within the United States
- Has filed a federal income tax or information return in the United States for the previous year detailing more than $5 million in gross receipts or sales
If you are unsure if your business qualifies for an exemption, consult a business attorney suggests Barclay.
There is no fee to file electronically with the Financial Crimes Enforcement Network, but there are required reporting timelines that are detailed below.
For a company formed before Jan. 1, 2024, an initial BOI Report must be filed by Jan. 1 of 2025.
For a company formed on or after Jan. 1, 2024, and before Jan. 1, 2025, a BOI Report must be filed within 90 calendar days of the date which it received actual or public notice that its creation has become effective.
A company created on or after Jan. 1, 2025, a BOI Report must be filed within 30 calendar days of the date that it received actual or public notice that its creation has become effective.
Failure to report can result in penalties including civil fines up to $500 per day up to $10,000 and criminal penalties up to $10,000 and up to two years in prison.
A beneficial owner is an individual who directly or indirectly exercises substantial control over the reporting company or owns at least 25% of its ownership interests explain Barclay.
BOI Reports must set forth the following information for a reporting company:
- Full legal name
- Any trade or ‘doing business as’ names
- Complete and current address of the principal place of business
- Jurisdiction of formation
- Taxpayer identification number
The BOI Report must also include the following information for the reporting company’s beneficial owner or owners: their full legal name, date of birth, complete current residential street address, unique identifying number as well as the issuing jurisdiction from a current U.S. passport or state/local ID document or driver’s license or a foreign passport if the individual has none of those and an image from the document from which the identifying number is sourced.
This article should not be considered legal advice and if you have any questions or need legal advisement, you are strongly encouraged to contact a business attorney.