Staying current on legislation that may impact your business or impose new regulations is vital to remaining in compliance and avoiding costly fines. One piece of legislation that affects nearly all businesses under $5 million in gross revenue is the Corporate Transparency Act.
If your business gross revenue comes in under that threshold and you employ fewer than 20 full-time employees , this may impact you, so keep reading to find out how to stay compliant.
What is the Corporate Transparency Act?
Enacted in 2021, the Corporate Transparency Act aims to curb illicit financial dealings in business. These include money laundering, tax fraud, and terrorism financing. It requires many of the companies operating in the United States to provide documented information about the individuals who control or own them. The Act went into effect on January 1, 2024.
Capturing this vital information can aid in combating illegal financial activity and preventing people with malicious intent from hiding their ownership or benefitting from the success of a company in which they are a beneficial owner. According to Congress, such tactics are widely used and can significantly impact national economic integrity and security.
All businesses that meet certain criteria are required to file a Beneficial Ownership Information (BOI) Report to the Financial Crimes Enforcement Network (FinCEN), a division of the Department of Treasury. Corporations, limited liability companies (LLCs), and similar entities filing with the Secretary of State or similar state offices are subject to the regulations. However, companies with more than $5 million reported gross revenue the previous year and more than 20 full-time employees are exempt and other exemptions may apply.
What is a Beneficial Ownership Information Report?
The Beneficial Ownership Information (BOI) Report provides details about individuals who are associated with the company submitting the information. The extent of the detail included in this report depends on when the business was established.
Companies that were established or registered on or after January 1, 2024, are required to provide details about:
- The business
- Beneficial owners (including the names, addresses, birth dates, and identification numbers)
- Company applicants (including all detail above)
Businesses registered or established prior to January 1, 2024, are not required to include detail about company applicants.
Additional required detail includes the company’s legal name, any trade name or “doing business as” name, current principal place of business address, and taxpayer identification number.
The BOI Report does not have to be submitted annually. Unless information needs to be corrected or updated, the report only needs to be submitted once.
Timeline Requirements for BOI Reporting
The BOI Report must be filed within a certain timeframe. Companies existing prior to January 1, 2024, must file by January 1, 2025, while companies created on or after January 1, 2024, but before January 1, 2025, are required to file the report within 90 days of registration or creation.
Ensure Compliance with the Corporate Transparency Act
Failing to comply with this regulation could subject your business to fines and penalties. Our partner, The Compliance Center, can help you determine whether your business is subject to this requirement. By completing a brief online survey, experts will determine eligibility and provide your business information to the associated law firm for review. Eligible company owners can work closely with The Compliance Center to produce the necessary paperwork for submission to the FinCEN.
