The Corporate Transparency Act (CTA) expanded anti-money laundering laws and created new mandatory reporting requirements for certain companies doing business in the U.S. Beginning in 2024, a significant number of businesses will be required to report beneficial ownership information (BOI) for people who own or control a company to the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department. The intent of the BOI reporting is to create a national database for use by national security and law enforcement agencies to prevent the use of shell companies for criminal activity and help U.S. law enforcement combat money laundering, financing of terrorism, and other illegal activity.
The following information is meant to be general only and should not be applied to your specific facts and circumstances without consultation with an attorney and/or other professional adviser who is informed on CTA reporting matters.
What entities are required to comply with the CTA’s BOI reporting requirement?
Entities organized both in the U.S. (Domestic) and outside the U.S. (Foreign) may be subject to the CTA’s reporting requirements. A company is considered a reporting company if a document was filed with the secretary of state (SOS) or similar office to create or register the entity. Corporations (including S Corporations), limited liability companies (LLCs), or any other entity created by the filing of a document with a SOS or any similar office under the laws of a U.S. state are required to submit a BOI filing with FinCEN.
Domestic entities that are not created by the filing of a document with a secretary of state or similar office are not required to report under the CTA.
Who is a beneficial owner?
Any individual who, directly or indirectly, either:
- Exercises “substantial control” over a reporting company, or
- Owns or controls at least 25 percent of the ownership interests of a reporting company
When must companies file?
There are different filing deadlines depending on when an entity is registered/formed or if there is a change to the beneficial owner’s information. The deadline to file is calculated based on the date that the company’s creation or registration is effective, or the change or discovery of error occurred.
- New entities (created/registered in 2024) — must file within 90 days
- New entities (created/registered after 12/31/2024) — must file within 30 days
- Existing entities (created/registered before 1/1/24) — must file by 1/1/25
- Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports — must file an update or correct prior report within 30 days
What is a FinCEN Identifier?
Individuals can request a FinCEN Identifier (FinCEN ID) to use in place of supplying detailed information on the report. A FinCEN ID is a unique number assigned by FinCEN which is obtained by submitting the same information as is required of a beneficial owner.
A FinCEN ID may be useful to individuals who prefer to send their personal information directly to FinCEN rather than through a reporting company, or to individuals that may be required to supply information as a beneficial owner or company applicant of several reporting companies.
Risk of non-compliance
Penalties for willfully not complying with the BOI reporting requirements can result in criminal and civil penalties of $591 per day that the report is late up to a maximum of $10,000 and imprisonment for up to two years.
