How Does the Corporate Transparency Act’s BOI Reporting Requirement Impact Small Businesses?
Small business owners face what can feel like an endless stream of legal updates and policy changes. As of January 1, 2024, there is another new requirement that affects millions of small businesses across the country – The Corporate Transparency Act (“CTA”).
The Corporate Transparency Act
Recently, congress, in conjunction with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), issued the Corporate Transparency AAct. This act requires companies to report their Beneficial Ownership Information (BOI). It’s crucial that small business owners are aware of the details of this requirement to avoid penalties for non-Acompliance. Failing to file the form could result in jail time or fines up to $10,000.
The CTA is primarily intended to address money laundering that can occur through LLCs, corporations, and other business entities. Collecting BOI is one way to enable the government’s efforts to stop illegal activity., such as tax fraud, terrorism funding, and money laundering.
Any business entity that files with their state Secretary or other similar state or tribal office is required to report beneficial ownership information. So, companies that were founded in the U.S. and foreign-founded companies registered in the US are required to submit a BOI report. Companies required to report that were formed prior to January 1, 2024, have until January 1, 2025, to file their first BOI report.
However, if you establish your business during 2024, you will have 90 days from the date you received notice your business is in effect to file your initial BOI report.
- There are exceptions to the BOI reporting rule, and most apply to businesses that are already regulated by extensive government oversight and laws. For example, businesses that file with the Securities and Exchange Commission are exempt.
Large operating companies are also exempt from BOI reporting. Your business may qualify for this exemption if it has more than 20 full-time domestic employees. Or, an office in the U.S., and generated more than $5 million in gross sales last year.
If you own a small business that doesn’t qualify for exemption, you will be required to report:
- The company’s name and any DBA names
- Address of the main office
- Taxpayer identification number
- The jurisdiction where the business was formed.
- The “Beneficial Owners”, which include some owners of the company and some management positions
Companies will also have to provide the following information about their beneficial owners:
- Legal name and date of birth
- Residential address
- Other identifying information, such as a passport or government-issued ID
Determining who are beneficial owners, providing all the information, and collecting all the information can be complicated, tiresome, and difficult. Consulting with a business lawyer is the safest way to ensure you are meeting the necessary reporting requirements and help keep you on track to meet the reporting deadline. Contact EmergeCounsel today for a free consultation.