The Corporate Transparency Act (CTA) went into effect on January 1, 2024, and imposes a brand-new federal filing requirement on most corporations, limited liability companies, limited partnerships, and certain other business entities.
The CTA applies only to business entities such as corporations and LLCs that are formed by filing a document with a secretary of state or similar official. It also applies to foreign business entities that register to do business in the United States.
Some businesses are exempt from the CTA, including
larger businesses with 20 or more employees and $5 million in receipts, and
businesses already heavily regulated by the government, such as publicly traded corporations, banks, insurance companies, non-profits, and others.
The CTA does not apply to sole proprietors or general partnerships in most states. But it does apply to single-member LLCs, even though the tax code disregards such entities and taxes them on Schedule C, E, or F of Form 1040.
Entities subject to the CTA are called “reporting companies.” People who form new reporting companies during 2024 must file a beneficial ownership information (BOI) report with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) within 90 days of forming the company.
However, the owners of reporting companies created before 2024 must file a BOI report by January 1, 2025 (but think December 31, 2024).
These BOI reports must disclose the identities and provide contact information for all of the entity’s “beneficial owners”: the humans who either (1) control 25 percent of the ownership interests in the entity or (2) exercise substantial control over the entity.
Your BOI report must contain all the following information for each beneficial owner:
Full legal name
Date of birth
Complete current residential street address
A unique identifying number from either a current U.S. passport, state or local ID document, or driver’s license or, if the individual has none of those, a foreign passport.
An image of the document from which the unique identifying number was obtained.
FinCEN created a new database called BOSS (Beneficial Ownership Secure System) for the BOI data and will deploy the BOSS to help law enforcement agencies prevent the use of anonymous shell companies for money laundering, tax evasion, terrorism, and other illegal purposes. It will not make the BOI reports publicly available.
The initial BOI report filing does not expire, there is no filing fee, and you don’t need to renew it. Additionally, there is no annual or periodic filing requirement. However, you have an ongoing duty to keep the BOI report up to date by reporting any changes to FinCEN within 30 days of occurrence.
Failure to comply can result in hefty monetary penalties and up to two years in prison.
How do I report?
Reporting companies will have to report beneficial ownership information electronically through FinCEN’s website: www.fincen.gov/boi
The system will provide the filer with a confirmation of receipt once a completed report is filed with FinCEN.