The Corporate Transparency Act is the newest law to prevent money laundering by criminals and shady organizations and goes into effect January 1, 2024. Most businesses in the US will need to report the company’s beneficial ownership information (BOI) to the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) in 2024.
If you are an existing business prior to January 1, 2024, you must report BOI by January 1, 2025. If you are a new business on or after January 1, 2024, you must report BOI within 30 days of filing with a Secretary of State or similar office.
Business information that needs to be reported includes the legal names, trade names or DBAs, addresses, taxpayer identification number (this is typically the Federal EIN), and the jurisdiction that the business is formed or registered in.
Beneficial ownership information (BOI) needs to be reported about the individuals that own the business entity. This includes owners that either own 25% or more of the company’s interest or who have “substantial control” of the company (even with 0% ownership). The personal information on all owners that needs to be reported includes legal name, birthdate, residential address, and a valid identification number and image (i.e. driver’s license or unexpired passport).
The individual that is reporting the information will also need to be reported (i.e., an attorney or accountant assist with the business report). Ongoing, information will need to be updated any time the information changes (i.e., ownership changes or address changes).
Reporting will be done on the FinCEN website. Information is supposed to be kept to those agencies that need to know and is not supposed to be public. Choosing not to report the required information is a violation that can be met with civil penalties of fines up to $500 per day and prison sentences of up to 2 years (or both).
Businesses that must file include corporations, limited liability companies, and other entities that file with a Secretary of State or similar office under state or Tribal laws. Excluded entities typically include ones that are already required to report similar information to the federal government (i.e., banks, financial institutions, dealers of securities). Depending on state law, a Trust may also be required to report.
What Your Business Should Do:
- Determine if you are a Business that must report. You may want to consult with a lawyer to determine if your corporate structure requires you to report.
- Update your records with current information for all beneficial owners, including the identification document.
- Determine who will be responsible for completing the required report and when that needs to be done by for your business.
- Create processes to ensure updates to beneficial ownership information are received timely and reported to the FinCEN as required.
The reporting form is not yet available but should be available from FinCEN before the end of 2023. Businesses are not able to report information at this time.
