Small businesses can now add another filing requirement onto their “to do” list. Back in 2021 Congress passed the Corporate Transparency Act (CTA) placing an additional new reporting requirement upon small businesses. This new reporting requirement begins in 2024 and comes along with strict filing due dates.
The purpose of the CTA is the requirement for business entities to disclose the Beneficial Ownership Information (BOI) of such business entities with the goal being to reduce money laundering, tax fraud and other illicit activities. Beneficial owners fall into two classes of categories classified as being either:
- A person that either directly or indirectly exercises substantial control over the business entity, or
- A person that either directly or indirectly owns or controls at least 25% of the business entity.
Beneficial Ownership Information reports will be required to be submitted to the Financial Crimes Enforcement Network (FinCEN), a bureau under the Department of Treasury, beginning on January 1, 2024. There is no fee to file this report. And, this report is not an annual filing, but a one-time filing for most business entities. Once the initial BOI report is filed, an additional BOI report will only be required to be filed to report updated and corrected BOI information. Depending on when the business was initially set up and registered to do business will determine the time frame for filing the business’s initial BOI report:
- Companies that were set up and existed prior to January 1, 2024 will have until January 1, 2025 to file their initial BOI report.
- Companies that are set up and registered on or after January 1, 2024 and before January 1, 2025 will have 90 calendar days from the date of creation to file their initial BOI Report.
- Companies that are set up after January 1, 2025 will have 30 calendar days from the date of creation to file their initial BOI Report.
- Revised BOI information must be submitted via a corrected/updated BOI report within 30 calendar days of the date the company becomes aware of changed or updated information.
Information with regard to the reporting company that must be disclosed in the BOI report include:
- Legal name of the company
- Any additional trade name or “doing business as”
- Current street address of the principal place of business
- State or Tribal jurisdiction of formation of the company
- IRS TIN/EIN of the reporting company
And for each beneficial owner identified, the reporting company must provide:
- Full legal name, date of birth, current residential or business street address
- Unique identifying number from an acceptable identification document (passport, drivers license, or similar identifying document)
- An Image of the identifying document
One last item to be aware of, PENALTIES for noncompliance! Penalties for reporting violations are severe, being $500 per day that the violation continues, and reaching up to $10,000 in fines and up to 2 years imprisonment for criminal violations. Due to the severe penalties for noncompliance of BOI reporting, our firm strongly recommends that all our business clients make CTA compliance and the required BOI report filing a priority. Additionally, we recommend that you review the Small Entity Compliance Guide to BOI and BOI reporting FAQS (links below), and/or that you work with an attorney to gather the required information, complete the BOI report, and then submit to FinCEN prior to the January 1, 2025 deadline or earlier filing deadline as it may apply to your business as noted above. Due to the legal complexity involved, we are not currently able to provide this service of filing the BOI report on our clients’ behalf, but please feel free to contact your tax preparer with questions you may have.