Beneficial Ownership Information Reporting Requirements of the Corporate Transparency Act

Update as of 3/4/2024

The Corporate Transparency Act (CTA) has been declared unconstitutional, putting the newly finalized law in jeopardy. Beneficial Ownership Information (BOI) reporting requirements directing closely held businesses to submit personal details about the beneficial owners to the Financial Crimes Enforcement Network (FinCEN) are now in limbo as the government prepares its response to the ruling. 

As part of the Corporate Transparency Act (CTA), beneficial owners of qualifying companies will be required to begin submitting Beneficial Ownership Information (BOI) Reporting. To ensure your business is prepared to meet these requirements once they take effect on January 1, 2024, begin preparing for BOI reporting as part of your year-end planning strategy.

Key Takeaways:

• Beneficial owners are individuals who directly or indirectly exercise substantial control over the company or who own or control at least 25% of ownership interest of the company
• Beneficial Ownership Information reports will be accepted starting January 1, 2024
• Companies registered or created prior to January 1, 2024, will have until January 1, 2025, to submit their BOI report
• Companies created or registered after January 1, 2024, and before January 1, 2025 must report their BOI within 90 days
• Companies created or registered on or after January 1, 2025 will have 30 calendar days from creation or registration to file their initial BOI reports
• Certain entities are exempt from BOI reporting requirements, including publicly traded companies, not-for-profits and certain large operating companies

Beneficial Ownership Information Reporting Requirements

The Corporate Transparency Act (CTA) will take effect on January 1, 2024. Passed in 2021, the CTA aims to prevent tax fraud, tax evasion, money laundering and other illicit activities by requiring companies to disclose their beneficial owners to the U.S. government.

A key component of the CTA is Beneficial Ownership Information (BOI) Reporting. Starting on January 1, 2024, numerous companies in the United States must begin reporting information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).

Beneficial owners are individuals who directly or indirectly, exercise substantial control over the company or own or control at least 25% of the ownership interest of the company. Reporting companies are any corporations, limited liability companies, limited liability partnerships or similar entities that are:

• Created by filing a document with a secretary of state or similar office under the law of a state or Indian Tribe for domestic reporting companies; or
• Formed under the law of a foreign country but registered to do business in the United States by filing a document with the secretary of state or similar office under the law of a state or Indian Tribe for foreign reporting companies.

There are 23 types of entities that are exempt from the BOI reporting requirements. Some of these entities include publicly traded companies, banks, not-for-profits, and certain large operating companies. These “large” companies are defined as organizations that:

1. employ more than 20 full-time employees in the United States,
2. have an operating presence in the United States at a physical office, and
3. filed a United States Federal income tax or information return for the previous year reporting over $5 million in gross receipts or sales, excluding gross receipts from sources outside the United States

There is no annual reporting requirement. A reporting company files its initial BOI report and updated or corrected BOI reports as needed. If there are any changes to the required information or the beneficial owners included in a BOI report filed previously, then an updated report must be filed no later than 30 days after the date of the change.

BOI Required Information

For each beneficial owner, the reporting company will need to provide the beneficial owner’s:

• Full legal name
• Date of birth
• Current address
• Unique identifying number from an acceptable identification document (driver’s licenses, passports or FinCEN identifiers are acceptable), and
• An image of their government-issued photo ID from which the identifying number was provided

Reporting companies will also need to provide their own full legal name, any trade names, current address, the jurisdiction in which the company was formed or registered and an IRS-issued Taxpayer Identification Number.

Preparing for the CTA

All potential reporting companies should start preparing for the CTA by:

• Identifying beneficial owners and collecting their relevant information
• Reviewing CTA guidance materials and regulations provided by FinCEN
• Creating and implementing procedures and internal policies to comply with the CTA
• Consulting with professional and legal advisors to ensure compliance and avoid any penalties

While BOI reports will be accepted starting on January 1, 2024, if a company was registered or created prior to January 1, 2024, then they will have until January 1, 2025, to submit their BOI report. If a company is registered or created after January 1, 2024, and before January 1, 2025 they must report BOI within 90 days of notice of creation or registration. Companies registered or created on or after January 1, 2025 will have 30 calendar days to file their initial BOI report. All updates or corrections to beneficial ownership information that were previously filed with FinCEN must be submitted within 30 days.

The Corporate Transparency Act and Beneficial Ownership Information Reporting are substantial steps towards improving transparency in entity ownership and structure. While these may seem daunting now, having a good understanding of the CTA and preparing for its implementation can help businesses navigate these new requirements efficiently and effectively.

Anders Tax advisors work with businesses to keep them in compliance with ever-changing financial regulations. Learn more about our services and the associated fees by requesting a meeting with an Anders advisor below.