Effective January 1, 2024, a significant reporting requirement took effect for businesses in the United States with Beneficial Ownership Information (BOI) reporting under the Corporate Transparency Act (CTA). The CTA, enacted in 2021, aims to enhance transparency in entity structures and ownership, combatting money laundering, tax fraud and other illicit activities.

As a business owner or professional, your understanding of the key aspects of this regulation is crucial for your compliance. Here’s a comprehensive guide to help you navigate the Corporate Transparency Act.

Key Compliance Deadlines

Entities formed before January 1, 2024, have until January 1, 2025, to file their initial BOI reports.

Entities formed on or after January 1, 2024 but before January 1, 2025 must submit their initial BOI report within 90 days of formation.

Entities formed on or after January 1, 2025 must submit their initial BOI report within 30 calendar days of formation.

Who Needs to Report?

Reporting companies include entities formed or registered to do business in the U.S., such as corporations and LLCs.

Exemptions and Exceptions

There are 23 listed exemptions, including large operating companies, nonprofit entities, political organizations and others. Public companies, insurance companies, banks and entities subject to regulatory oversight are also among the exemptions.

BOI Report Information

The report includes details about the reporting company, such as its name, address and taxpayer identification number. Beneficial owners (individuals with substantial control or ownership of 25 percent or more) are identified with information like full legal name, date of birth and passport or driver’s license number.

Any changes in the information provided about the reporting company or the beneficial owners, including who the beneficial owners are, must be included in an updated report filed by the company within 30 days of the change.  If any of the information submitted was inaccurate when submitted, it must be corrected within 30 days of becoming aware of the inaccuracy. 

Submission Process

BOI reports are filed electronically through an online interface provided by the Financial Crimes Enforcement Network, or FinCEN. BOI information is not publicly available and is disclosed only to law enforcement agencies in specific circumstances.

Penalties for not filing BOI reports include civil and criminal consequences, which emphasize the importance of accurate reporting.

Small Business Compliance

Small businesses should start filing as soon as possible to ensure all required filings are completed no later than the January 1, 2025 required date.  All new businesses should prepare to file shortly after the business is organized.

The Corporate Transparency Act introduces a new era of accountability and transparency for businesses. Staying informed and compliant with the reporting requirements is essential to avoid penalties and contribute to the broader goal of combating financial crimes.

If you have questions or need assistance navigating the Corporate Transparency Act, consult with a business attorney at Harrington, Hoppe & Mitchell.

Shawna L. L’Italien, a lawyer in the Salem office of Harrington, Hoppe & Mitchell, focuses on business organization, commercial and real estate transactions, succession planning, elder law and estate planning. She can be reached at slitalien@hhmlaw.com or at (330) 337-6586.