The Corporate Transparency Act (CTA) is a new federal law requiring most U.S. companies, including small businesses and holding entities, to report their ownership details to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of Treasury. The law’s primary aim is to create a national registry to help law enforcement and national security agencies prevent the use of shell companies for illegal activities such as money laundering and fraud.
Who Must Report: Understanding Reporting Companies
The CTA applies to reporting companies, which are divided into two categories:
1. Domestic Reporting Companies: This includes corporations, limited liability companies (LLCs), and any other legal entity created by filing documents with a secretary of state or similar office within the U.S.
2. Foreign Reporting Companies: This includes any entity (such as foreign corporations and LLCs) formed under foreign law but registered to do business in the U.S. through a similar filing process with a secretary of state or equivalent office.
These companies must file a Beneficial Ownership Information (BOI) Report, which outlines the company’s ownership structure. The information required includes:
- Full legal name of each beneficial owner
- Date of birth
- Residential street address
- A unique identification number from a valid U.S. passport, state driver’s license, or another government-issued ID
Depending on the company’s management and ownership structure, this reporting process can range from straightforward to complex, especially if trusts are involved in the company’s ownership.
Filing Deadlines: When to Submit Your BOI Report
The deadline for filing the initial BOI Report depends on the company’s formation date:
- Companies formed before January 1, 2024: The BOI Report must be filed by January 1, 2025.
- Companies formed between January 1, 2024, and December 31, 2024: The report is due within 90 days of formation.
- Companies formed on or after January 1, 2025: The report must be filed within 30 days of formation.
For example, if your company was recently formed in 2024, you must submit the BOI Report within 90 days of formation, which means deadlines may be approaching quickly. Businesses formed before 2024 must meet the January 2025 deadline.
After the initial report is filed, there is no periodic filing requirement. However, companies must update their BOI whenever there are changes in ownership or control, and these updates must be submitted within 30 days of the change.
Penalties for Non-Compliance: What’s at Stake
Failing to comply with the CTA’s reporting requirements can result in significant penalties. FinCEN warns that companies who fail to submit a BOI Report may face:
- Fines of up to $500 per day for every day the report is late
- Criminal penalties, including fines up to $10,000 and imprisonment for up to two years
Moreover, senior officers of the company may be held personally responsible for the company’s non-compliance.
How Schwartzman Law Group Can Help
Filing your BOI report can be straightforward, but depending on your business’s complexity, you may benefit from professional assistance. Schwartsman Law Group is here to help ensure that your company complies with the CTA. If you need assistance with filing your BOI report or navigating the Corporate Transparency Act, we’re ready to assist you.
You may also complete the BOI filing on your own through the FinCEN BOI Filing System at boiefiling.fincen.gov. For more detailed guidance, FinCEN has a Small Entity Compliance Guide and a section of frequently asked questions available at www.fincen.gov/boi/small-business-resources.
If you have any questions or would like to receive future updates from our firm regarding the CTA, please feel free to reach out to us.
The Corporate Transparency Act introduces important compliance requirements for business owners. With the upcoming deadlines, it’s essential to ensure your company’s beneficial ownership information is reported accurately and timely to avoid penalties. As always, seeking professional guidance is recommended to navigate the specifics of your situation. Contact Schwartsman Law Group today for expert advice on complying with the CTA and other business legal needs.
This blog is for general informational purposes only and should not be considered as legal advice. Always consult with a legal professional regarding your specific circumstances.
