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What is the Corporate Transparency Act (CTA) and Beneficial Ownership Information (BOI) Reporting?
Passed in 2021, the Corporate Transparency Act cracks down on illicit activity by demanding greater transparency from certain US businesses. By requiring detailed ownership information, it makes it harder for criminals to mask their tracks and exploit the financial system for tax evasion, money laundering, and terrorism financing.
Who Must Comply With BOI Reporting?
Any company formed by filing documents with a state or tribal office, like corporations and LLCs, must report their beneficial owners unless they fall under specific exemptions. According to FINCEN over 90% of all businesses must comply.
When Does The New Law Take Effect?
Companies formed before January 1, 2024, have until January 1, 2025, to file their initial BOI report with FinCEN. New companies formed after that date must file within 90 days of creation or registration.
What About Penalties?
The penalties are steep. Willful violations could result in civil penalties and/or criminal penalties. Potential civil penalties include fines of $500 per day, up to $10,000, while criminal penalties could include imprisonment of up to two years.
BOI Reporting FAQs
Why do companies have to report beneficial ownership information to the U.S. Department of the Treasury?
To combat financial crime and hidden ownership, Congress in 2021 passed the bipartisan Corporate Transparency Act, requiring reporting of beneficial owners behind companies.
Under the CTA, who can access beneficial ownership information?
FinCEN’s secure database houses beneficial ownership information, accessible only to authorized officials for specific purposes like national security, intelligence, and law enforcement. Financial institutions may also access the information with company consent or under regulatory supervision. Rigorous security protocols protect this sensitive data, and FinCEN collaborates with authorized users to ensure its proper handling and confidentiality.
How will companies become aware of the BOI reporting requirements?
FinCEN has created a BOI outreach campaign to support reporting companies. Engagement with government offices and industry groups further strengthens clarity. For straightforward information regarding BOI, contact us today to learn more.
Should my company report beneficial ownership information now?
- Existing companies (before 2024): File your BOI report by January 1, 2025.
- Companies formed in 2024: File within 90 days of receiving notice.
- New companies (after 2024): File within 30 days of receiving notice.
Can a company created or registered in a U.S. territory be considered a reporting company?
Companies formed or registered to do business in any US territory, including Puerto Rico, Guam, and the Virgin Islands, must report beneficial ownership information to FinCEN, just like companies in the 50 states and DC.