If You Own A Business, Don’t Overlook Beneficial Ownership Information Reporting

In the ever-evolving landscape of business regulations, the Corporate Transparency Act (CTA), passed as part of the National Defense Authorization Act for Fiscal Year 2021, introduces new reporting requirements for businesses in the United States, specifically focusing on beneficial ownership. This reporting starts in 2024, and you need to be aware of and take action if yours is a reporting company.

Companies Required to Report Beneficial Ownership Information (BOI) to FinCEN - There are two types of reporting companies:

• Domestic reporting companies - corporations, limited liability companies, and any other entities created by filing a document with a secretary of state or any similar office in the United States. This includes single-member LLCs.
• Foreign reporting companies - entities (including corporations and limited liability companies) formed under the law of a foreign country registered to do business in the United States by filing a document with a secretary of state or any similar office.

Who is a Beneficial Owner? The CTA defines a beneficial owner as an individual who exercises substantial control over a company or owns or controls at least 25% of its ownership interests. Multiple beneficial owners can exist for a single company. The CTA excludes certain entities from this requirement, such as publicly traded companies, banks, credit unions, and certain regulated entities.

Filing Due Dates

Existing Businesses—If your company already exists as of January 1, 2024, it must file its initial BOI report by January 1, 2025, which provides plenty of time to comply. However, it is best not to procrastinate and risk penalties for not complying.  

New Businesses - For a U.S. business newly created on or after January 1, 2024, and before January 1, 2025, as well as a foreign entity that becomes a foreign reporting company in that time frame, the BOI report is due 90 calendar days from the earlier of the date on which the business receives actual notice that its creation has become effective or the date on which a secretary of state or similar office first provides public notice that the company has been created or registered.

Penalties - The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in civil penalties of up to $500 (inflation-adjusted to $591, effective January 25, 2024) for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure. So, this reporting requirement should be taken seriously.

Navigating the complexities of the CTA and its reporting requirements can be challenging. If you need help, you can contact my office at 502-893-9743 or email me at brooks@wickergroup.com to schedule a consultation and help you navigate this new regulatory landscape.