UPDATED January, 02, 2024:

FinCEN releases beneficial ownership information report.

Effective January 1, 2024, the new beneficial ownership reporting requirements kick in for newly formed or registered entities. FinCEN has finally released the new reporting forms, and business entities are now able to complete and submit the FinCEN beneficial ownership report.

This new mandate requires all new, non-exempt entities to complete the report within 90 days after receiving actual or public notice from the Secretary of State’s Office (or similar office) that its creation or registration is effective. Entities in existence prior to January 1, 2024, have until January 1, 2025, to submit the report, but they can do so anytime between now and January 1, 2025.

Reporting companies may upload a completed PDF file on the FinCEN website or fill out a web-based version of the report and submit it online. We’ve had reports of people having difficulties opening up the PDF file, but the web-based version allows people to view the entire form without actually having to complete it.

If you’d like help filing, SDO CPA will assist our clients with the BOI reporting requirement. Click here to get started.

The Corporate Transparency Act

Starting January 1, 2024, many businesses will be required to comply with the Corporate Transparency Act (“CTA). The CTA was enacted into law as part of the National Defense Act for Fiscal Year 2021. The CTA requires disclosing the beneficial ownership information (otherwise known as “BOI”) of certain entities from people who own or control a company.  

It is anticipated that 32.6 million businesses will be required to comply with this reporting requirement. The BOI reporting requirement intends to help US law enforcement combat money laundering, the financing of terrorism, and other illicit activities.  

The CTA is not a part of the tax code. Instead, it is a part of the Bank Secrecy Act, a set of federal laws that require record-keeping and report filing on certain types of financial transactions. Under the CTA, BOI reports will not be filed with the IRS but with the Financial Crimes Enforcement Network (FinCEN), another agency of the Department of Treasury.  

Below is some preliminary information for you to consider as you approach the implementation period for this new reporting requirement. This information is meant to be general only. It should only be applied to your specific facts and circumstances with consultation with competent legal counsel and/or other retained professional adviser 

What entities are required to comply with the CTA’s BOI reporting requirement? 

Entities organized both in the U.S. and outside the U.S. may be subject to the CTA’s reporting requirements. Domestic companies required to report include corporations, limited liability companies (LLCs), or any similar entity created by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe. 

Domestic entities that are not created by the filing of a document with a secretary of state or similar office are not required to report under the CTA.  

Foreign companies required to report under the CTA include corporations, LLCs, or any similar entity formed under a foreign country’s law and registered to do business in any state or tribal jurisdiction by filing a document with a secretary of state or any similar office.  

Are there any exemptions from the filing requirements? 

There are 23 categories of exemptions. The exemptions list includes publicly traded companies, banks, credit unions, securities brokers/dealers, public accounting firms, tax-exempt entities, and certain inactive entities, among others. Please note that these are not blanket exemptions; many entities are already heavily regulated by the government and thus already disclose their BOI to a government authority. 

In addition, certain “large operating entities” are exempt from filing. To qualify for this exemption, the company must:  

  1. Employ more than 20 people in the U.S.;  
  1. Have reported gross revenue (or sales) of over $5M on the prior year’s tax return and  
  1. Be physically present in the U.S. 

Who is a beneficial owner? 

Any individual who, directly or indirectly, either: 

  • Exercises “substantial control” over a reporting company or 
  • Owns or controls at least 25 percent of the ownership interests of a reporting company  

An individual has substantial control of a reporting company if they direct, determine, or exercise significant influence over important decisions of the reporting company. This includes any senior officers of the reporting company, regardless of formal title or if they have no ownership interest in the reporting company. 

The detailed CTA regulations define the terms “substantial control” and “ownership interest” further. For more information about the CTA regulations, visit https://www.govinfo.gov/content/pkg/FR-2022-09-30/pdf/2022-21020.pdf

When must companies file? 

There are different filing timeframes depending on when an entity is registered/formed or if there is a change to the beneficial owner’s information. 

  • New entities (created/registered in 2024) — must file within 90 days 
  • New entities (created/registered after 12/31/2024) — must file within 30 days 
  • Existing entities (created/registered before 1/1/2024) — must file by 1/1/2025  
  • Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports — must file within 30 days 

What sort of information is required to be reported? 

Companies must report the following information: full name of the reporting company, any trade name or doing business as (DBA) name, business address, state or Tribal jurisdiction of formation, and an IRS taxpayer identification number (TIN). 

Additionally, information on the entity’s beneficial owners and, for newly created entities, the company applicants of the entity is required. This information includes — name, birthdate, address, unique identifying number, issuing jurisdiction from an acceptable identification document (e.g., a driver’s license or passport), and an image. 

Risk of non-compliance 

Penalties for willfully not complying with the BOI reporting requirement can result in criminal and civil penalties of $500 per day and up to $10,000 with up to two years of jail time. For more information about the CTA, visit https://www.fincen.gov/boi

If you have any more questions about The Corporate Transparency Act, read answers the most frequently asked questions here.

If you’d like help filing, SDO CPA will assist our clients with the BOI reporting requirement. Click here to get started.

Please get in touch with our office if you’d like to discuss your business situation.  


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