Time is running out! If you have an LLC, partnership, or corporation, here’s what you need to know about the required Beneficial Ownership Report and the January 1, 2025 deadline.
What Is the Corporate Transparency Act?
In an effort to combat financial crimes like money laundering, terrorist financing, and tax fraud, the Corporate Transparency Act (CTA) was enacted in 2021. This legislation introduces new reporting requirements for businesses operating in the U.S., aiming to increase transparency around business ownership and prevent the misuse of anonymous corporate entities.
The CTA requires certain businesses to submit a Beneficial Ownership Information (BOI) Report to the Financial Crimes Enforcement Network (FinCEN), an office within the U.S. Department of Treasury.
This report requires identifying details about individuals who own or control a significant portion of the business. The goal is to make it easier for law enforcement agencies to access critical ownership data, ultimately curtailing illegal financial activities.
Who Qualifies as a Beneficial Owner?
Under the CTA, a “beneficial owner” is an individual who either:
- Exercises substantial control over the business, directly or indirectly, or
- Holds 25% or more ownership interest in the entity.
Businesses required to submit a BOI report include any corporation, Limited Liability Company (LLC), or other entities registered with a Secretary of State within the U.S. Common examples include:
- LLCs owned by individuals or multiple owners
- LLCs owned by a trust
- LLCs that hold real estate
- S Corporations
- Limited partnerships
However, some entities are exempt from this filing requirement. It’s essential for businesses to verify if their structure or ownership status falls under these exemptions.
How to File a BOI Report
To file a BOI report, businesses can visit FinCEN.gov. If the LLC or corporation is owned by individual(s), they can typically manage the filing independently using the FinCEN portal. However, if the entity’s ownership structure is more complex—such as an LLC owned by a trust, another LLC, or partnership—it may be wise to seek legal assistance to ensure compliance.
Deadlines to Meet
Filing deadlines vary depending on the establishment date of the entity:
- Entities created before January 1, 2024: BOI reports must be submitted by January 1, 2025.
- Entities created after January 1, 2024: BOI reports must be submitted within 90 days of registration.
Businesses are encouraged to avoid delaying their filings, as missing these deadlines can lead to substantial penalties.
Potential Penalties for Non-Compliance
Failure to file a BOI report on time can result in serious repercussions. Penalties include:
- Civil fines: Up to $500 per day for each day the report is late.
- Criminal penalties: Fines up to $10,000 and/or a maximum of two years in prison for more severe cases of non-compliance.
Need Help? Resources and Tools Are Available
While many businesses can handle BOI reporting on their own, there are resources available for those who need extra help. If you’re unsure about the process or need clarification, consulting with a legal professional is recommended, especially for complex ownership arrangements. Additionally, there are several companies that will help you prepare and file your BOI report for a fee.
The Corporate Transparency Act represents a significant shift toward transparency in the business landscape. With the right preparation, businesses can navigate this new requirement smoothly, stay compliant, and avoid potential penalties. For additional questions or guidance, refer to the CTA FAQs available on FinCEN.gov.
