Here Comes the Corporate Transparency Act
Are you a small business owner of a Corporation (and/or an S-Corp) or an LLC or LLP? If yes, then more than likely you meet the definition of a “reporting company” as defined by the Corporate Transparency Act (CTA) and effective January 1, 2024, are now subject to the reporting requirements of the CTA. This reporting requirement applies to all domestic and foreign businesses that were created by filing paperwork with your secretary of state or a similar state reporting agency unless the business meets the criteria for exclusion.
And, yes, it applies to single-owner LLCs, too.
What is the Corporate Transparency Act?
It’s a bipartisan law that was enacted in 2021 to fight tax evasion, money laundering, fraud, and other financial crimes often conducted by shell companies by requiring “reporting companies” to disclose information about the people who ultimately own or control them. This Beneficial Ownership Information (BOI) must be reported to U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).
There are three basic exemption categories to the Act:
1) Businesses that were not created by registering with a state, like a Sole Proprietorship
2) Businesses that are already federally regulated
3) Large businesses with at least 20 employees, over $5 million in gross receipts, and a large US presence.
The BOI must be reported for any person who has direct or indirect control over the company OR owns or controls at least 25% of the ownership interest in the company. The information that must be provided for each person meeting the criteria are name, date of birth, address, and an identifying number (and image of) a non-expired US Passport, state driver’s license, or state ID card.
For businesses created before January 1, 2024, the initial BOI report must be filed by January 1, 2025. For businesses created after January 1, 2024, but before January 1, 2025, reporting must be done within 90 calendar days of receiving state notice that the business registration is effective. For businesses created after January 1, 2025, the initial report must be filed within 30 calendar days of receiving notice that the registration is effective.
FinCEN has released a compliance guide for small businesses with information on how to file here: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf
Do you have questions about financial issues affecting your business? I’m here to help!