THE CORPORATE TRANSPARENCY ACT:
WHAT EVERY SMALL BUSINESS OWNER NEEDS TO KNOW

SUMMARY:  On January 1, 2024, a new reporting requirement will go into effect that may require many small businesses to file a Beneficial Ownership Information (BOI) Report with the U.S. Department of Treasury’s Financial Crimes Enforcement Network.

The following is a brief overview of the Corporate Transparency Act and the requirements that employers must follow to comply with the law:

1. What is the Corporate Transparency Act? 

The Corporate Transparency Act is primarily an anti-money laundering law enacted by Congress.  According to Congress, federal legislation providing the collection of beneficial ownership information is needed to protect national interests and to better enable efforts to counter such illegal acts as attempts to conceal ownership of corporations, LLCs, or similar entities in the United States to facilitate money laundering, financing of terrorism, tax fraud, and other illegal acts.  The Act requires certain business entities to file, in the absence of an exemption, information on their “beneficial owners” with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”). The information will not be publicly available, but the FinCEN is authorized to disclose the information to:

• U.S. federal law enforcement agencies;
• With court approval, certain other enforcement agencies;
• Non-U.S. law enforcement agencies, prosecutors, or judges based upon a request of a U.S. federal law enforcement agency; and
• With consent of the reporting company, financial institutions and their regulators.

2. What is the effective date of the Act?  

The new reporting requirement will go into effect on January 1, 2024. 

3. Who has to file a BOI report? 

Every corporation, LLC, or other entity created by the filing of a document with a Secretary of State or similar office under the law of a state or Indian tribe is required to file a BOI report, unless it qualifies for an exemption.

4. Who is exempt from filing a BOI report? 

There are 23 categories of entities that are exempt from filing a BOI report.  Below is a list of all 23 exemptions:

• Securities reporting issuer
• Governmental authority
• Bank
• Credit Union
• Depository institution holding company
• Money services business
• Broker or dealer in securities
• Securities exchange or clearing agency
• Other Exchange Act registered entity
• Investment company or investment adviser
• Venture capital fund adviser
• Insurance company
• State-licensed insurance producer
• Commodity Exchange Act registered entity
• Accounting firm
• Public utility
• Financial market utility
• Pooled investment vehicle
• Tax-exempt entity
• Entity assisting a tax-exempt entity
• Large operating company (defined as a company which employs more than 20 full time employees, has an operating presence at a physical address in the U.S., and filed a Federal income tax return in the U.S. for the previous year demonstrating more than $5,000,000 in gross receipts or sales)
• Subsidiary of certain exempt entities
• Inactive entity

5. When is the BOI report due to be filed?

A domestic reporting company created before January 1, 2024 and an entity that became a foreign reporting entity before January 1, 2024, must file a report by January 1, 2025.

For a domestic reporting company created on or after January 1, 2024 and before January 1, 2025, and any entity that becomes a foreign reporting company on or after January 1, 2024 and before January 1, 2025, the report must be filed within 90 calendar days of creation or registration.  

Any domestic reporting company created on or after January 1, 2025 and any entity that becomes a foreign reporting company on or after January 1, 2025, must file a report within 30 calendar days of its creation or registration.  

6. What information is required in the initial BOI report? 

• Reporting Company’s full legal name
• Any trade or “doing business as” names
• Current business street address
• The state, tribal, or foreign jurisdiction of formation
• For a foreign reporting company, the state or tribal jurisdiction where the company first registers
• The IRS taxpayer identification number
• Information on each of the individuals who are the company’s beneficial owners:
  • Full legal name
  • Date of birth
  • Current residential or business street address
  • Unique identifying number and issuing jurisdiction from one of the following documents (passport, driver’s license or other government issued document) or a FinCEN identifier

7. Where do I file the BOI report?

Companies that must file a BOI report should make their filing here: https://www.fincen.gov/boi. Please note that the filing portal is not available until after January 1, 2024.

8. What are the penalties for non-compliance? 

It is unlawful for any person to willfully provide or attempt to provide, false or fraudulent beneficial ownership information to FinCEN, or willfully fail to report complete or updated beneficial ownership information to FinCEN. Any person violating the reporting requirements of the Act is liable for civil penalties of not more than $500 for each day that the violation continues and criminal penalties of imprisonment of up to two years and fines of up to $10,000.

Unauthorized knowing disclosure or use of beneficial ownership information is punishable by civil penalties of $500 for each day the violation continues and criminal penalties of imprisonment of up to 10 years and fines of up to $500,000.

If you have any questions about the Corporate Transparency Act or how it impacts your business, please contact us at (205) 633-0200.