As a business owner, you’ve probably heard about the Corporate Transparency Act and the BOI filing requirement that went into effect January 1 of this year. But also as a business owner, you probably haven’t had the time to dive into all the details about what you need to know and what you need to do to ensure your business is in compliance.
Don’t worry! NC Planning is here to help. In this CTA compliance guide, you will learn:
- An overview of the new requirement
- What businesses are required to file a BOI report
- Which types of companies are exempt from filing
- What information needs to be disclosed in a BOI report
- When to file a BOI report
- How to file a BOI report
- What happens if your business fails to comply
- How to get help with the process
An Overview of the New Filing Requirement
Congress enacted a new filing requirement in a statute called the Corporate Transparency Act (CTA) that went into effect on January 1, 2024. It requires businesses with “qualifying entities” to file a Beneficial Ownership Information (BOI) Report with The U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). The National Federation of Independent Businesses estimates that 30 million small businesses will have to file a BOI report to FinCEN.
Through the creation of this national registry, FinCEN is attempting to counter alleged risks posed by shell companies that are set up for criminal activity, such as money laundering, corruption, drug and arms trafficking, and terrorist financing. The idea is that these risks can be mitigated, and criminals can be more easily identified and pursued by disclosing the key individuals who are involved in any particular reporting company.
What Businesses are Required to File a BOI Report?
The CTA specifies two categories of companies that are required to file a BOI report: domestic reporting companies and foreign reporting companies. On the domestic side of things, corporations, LLCs, or any other entities that are created or registrable with the secretary of state or a similar office are required to report. Foreign companies that are required to report include corporations, LLCs, or any other entities that are formed under the laws of a foreign country but are registered to do business in the US.
Which Types of Companies are Exempt from Filing
There are 23 specific types of companies that are exempt from the reporting requirement under the CTA. These include large operating companies, public companies, inactive entities, federally registered investment companies, and advisers, venture capital fund advisers, certain pooled investment vehicles, insurance companies and producers, public accounting firms, tax-exempt entities, entities assisting tax-exempt entities, governmental authorities, and subsidiaries of certain exempt entities.
Entities that are highly regulated are also excluded, which include banks, bank holding companies, savings and loan holding companies, credit unions, money transmitting businesses, money services businesses, securities brokers or dealers, securities exchange or clearing agencies, other entities that are registered with the SEC under the Exchange Act, regulated public utilities, and financial market utilities.
What Information Needs to be Disclosed in a BOI Report?
For entities created or registered on or after January 1, 2024, a BOI report must be filed to disclose information about the company’s individual beneficial owners, itself, and its company applicant.
A “beneficial owner” is any individual who either exercises substantial control over the reporting company or owns or controls 25% or more of the ownership interest of the reporting company.
A “company applicant” is any individual who directly files the document that creates the entity, registers the entity to do business in the US, or is responsible for directing or controlling the filing of the document.
Individuals must disclose their full legal name, date of birth, complete current address, and provide a form of identification with a photograph, such as a driver’s license or passport.
Filing companies have similar disclosure requirements such as the full legal name (DBA, trade name), complete current address, state or foreign nation of formation jurisdiction, and their tax identification number such as a TIN or EIN.
When to File A BOI Report
Reporting companies are required to file initial BOI reports and to file a new BOI report to report changes or inaccuracies that are discovered.
- A reporting company that is created or registered before January 1, 2024 has until January 1, 2025 to file its initial BOI Report.
- A reporting company that is created or registered on or after January 1, 2024, but before January 1, 2025, must file its initial BOI report within 90 days after receiving actual or public notice that the company’s creation or registration is effective.
- A reporting company that is created or registered on or after January 1, 2025, must file its initial BOI report within 30 days after receiving actual or public notice that the company’s creation or registration is effective.
Reporting Changes or Correcting Inaccuracies
- A reporting company has 30 days to report any changes to information in its BOI report regarding itself or its beneficial owners (e.g., the reporting company changes its name or address or becomes exempt or a beneficial owner transfers their interest or there is a change to their address or unique identifying number).
- A reporting company has 30 days to correct any inaccuracies as long as the reporting company is actually aware (or should be aware) of the inaccuracies.
How Does a Reporting Company File a BOI Report?
Reporting companies will need to report beneficial ownership information electronically through the FinCEN website. You can file the information directly, or you can ask NC Planning to assist you with the process or answer any questions you have!
What Happens if Your Business Fails to Comply
There are both civil and criminal penalties for willful failure to report BOI within the required time period or willfully providing false or fraudulent information, both of which may result in a maximum civil penalty of $500 per day that the violation continues, and criminal penalties of up to $10,000, imprisonment for up to two years or both.
Penalties may also apply to reporting companies and individuals if they cause a reporting company not to report or if senior officers fail to fulfill their obligation to accurately report or update a BOI report.
There are no penalties for filing an inaccurate BOI Report if a corrected report is filed within 30 days of a reporting company becoming aware or having reason to know of the inaccuracy and the corrected report is filed within 90 calendar days of the deadline for the original report.
How to Get Help with CTA Compliance
FinCEN’s website is easy to navigate and has videos, brochures, FAQs, and many other materials on the CTA.
Looking for an even easier route to CTA compliance? NC Planning can help!
If you need assistance with understanding any of the requirements under this new law, the attorneys at NC Planning are here for you. Schedule a 15-minute call with Jennifer on our business planning team to learn if this filing requirement applies to your business. And if it does, we can take care of the whole thing for you.