End of Year Deadline to File: Corporate Transparency Act

Understanding Beneficial Ownership Information Reporting under the Corporate Transparency Act

The Corporate Transparency Act (CTA), enacted as part of the National Defense Authorization Act for Fiscal Year 2021, introduces significant changes in how businesses report their beneficial ownership information (BOI). This blog aims to provide a clear and easy-to-understand overview of the requirements and implications of the CTA for businesses.

What is the Corporate Transparency Act (CTA)?

The CTA mandates that millions of domestic and foreign entities report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). This act is designed to enhance transparency in corporate ownership and combat illegal activities such as money laundering and terrorism financing.

Who Needs to Report?

All domestic and foreign entities that have filed formation or registration documents with a U.S. state or Indian tribe are required to report their BOI unless they meet one of the 23 exemptions listed by FinCEN.

Notably exempt entities include:

  • Large Operating Entities: Those that employ more than 20 people in the U.S., have gross revenue over $5 million as reported on the prior year’s tax return, and have a physical office in the U.S.
  • Publicly Traded Companies: Entities registered under Section 102 of the Sarbanes-Oxley Act (SOX).
When to File?

The reporting deadlines depend on the status and timing of the entity's creation or registration:

  • New Entities (created/registered in 2024): Must file within 90 days.
  • New Entities (created/registered after Dec. 31, 2024): Must file within 30 days.
  • Existing Entities (created/registered before Jan. 1, 2024): Must file by Jan. 1, 2025.
  • Reporting Changes: Entities must file within 30 days of any changes to previously reported information or discovering inaccuracies.
What Information Needs to be Reported?

Entities must report the following information through the FinCEN BOIR E-Filing System:

Company Information:

  • Full legal name and any trade or DBA names
  • Business address
  • State or Tribal jurisdiction of formation or registration
  • IRS Taxpayer Identification Number (TIN)

Beneficial Owners and Company Applicants:

  • Name
  • Birthdate
  • Address
  • Unique identifying number and issuing jurisdiction from an acceptable identification document, along with an image of the document
Penalties for Noncompliance

Failure to comply with the BOI reporting requirements can result in severe penalties:

  • Civil Penalties: Up to $591 per day that a violation continues.
  • Criminal Penalties: Fines up to $10,000 and/or imprisonment for up to two years.
Helpful Resources

For further information and detailed guidance, you can visit the following resources:

Understanding these requirements and ensuring timely compliance is crucial for all affected entities to avoid penalties and contribute to a more transparent business environment.