Key Takeaways:
- All “reporting companies” formed before January 1, 2024, must submit their Beneficial Ownership Information (BOI) to FinCEN by January 1, 2025.
- Failing to comply could lead to fines of $500 per day and up to two years in prison for willful violations.
- Review your reporting obligations, identify beneficial owners, and file your report to avoid last-minute issues.
The Corporate Transparency Act (CTA), now in full effect, has introduced important reporting requirements for businesses nationwide. While many companies have already started navigating this compliance process, the January 1, 2025 deadline for submitting Beneficial Ownership Information (BOI) reports is rapidly approaching for companies formed before January 1, 2024.
If your organization falls under the CTA’s scope, this filing obligation is critical to ensure you avoid potential penalties. Our initial article outlined the details of this landmark regulation. Now, with the deadline in sight, it’s time to revisit those steps and make sure your business is on track.
Who Needs to Act?
The CTA mandates that all “reporting companies” submit their BOI reports to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Reporting companies include US-based entities created by filing with a secretary of state and foreign entities registered to do business in the US. This scope captures a wide array of entities, including corporations, limited liability companies (LLCs), and limited partnerships, while excluding sole proprietorships, trusts, and general partnerships that require no formal state filing.
Entities may qualify for one of 23 exemptions, covering various regulated industries such as banks, credit unions, and registered investment firms. Among these, the Large Operating Company exemption is a common one, applicable to businesses with over 20 US-based employees, at least $5 million in U.S.-sourced revenue, and a physical operating presence within the United States. However, each exemption involves a detailed analysis, so it’s crucial for companies to confirm whether they qualify.
Key Compliance Steps to Take Before the New Year
As the deadline nears, companies must prioritize these compliance steps:
- Determine your reporting status: Confirm if your business qualifies as a reporting company or is exempt under the CTA. Consult our initial article for more details on what defines a reporting company and the specific Corporate Transparency Act exemptions that are available.
- Identify beneficial owners and company applicants: Reporting companies need to disclose individuals with substantial control over the company or with a 25% or greater ownership stake. For entities formed on or after January 1, 2024, information on “company applicants” (those responsible for filing formation documents) must also be included.
- Collect the required information: The BOI report requires detailed information for each beneficial owner, including full name, birth date, residential address, and government-issued ID details. FinCEN provides an option for beneficial owners and company applicants to use a unique FinCEN identifier instead of submitting individual information on multiple reports.
- File your BOI report with FinCEN: For entities formed before 2024, BOI reports should be submitted through the FinCEN BOI E-Filing System by January 1, 2025. Newly formed entities in 2024 have 90 days post-formation to file, and starting January 1, 2025, the reporting window narrows to 30 days.
- Plan for updates: After initial filing, companies must keep their BOI information current, submitting amended reports within 30 days of any change, such as shifts in ownership or control.
Why Compliance is Essential
The CTA’s goal is to prevent illicit financial activity by enhancing transparency across U.S. business entities. This law mandates that companies provide BOI to FinCEN, creating a secure registry accessible only to law enforcement, financial institutions, and other authorized entities. While many companies have adjusted their compliance protocols to meet these new requirements, this deadline marks an essential point for any business that hasn’t yet filed its BOI report.
To ensure compliance, visit FinCEN’s resources, including a Small Entity Compliance Guide and FAQ section, which are regularly updated to provide guidance on CTA compliance.
Failure to comply with the CTA’s reporting requirements carries substantial penalties, including daily civil fines of $500 (up to $10,000) and up to two years in prison for willful violations. Non-compliant businesses may also face operational limitations, such as restricted access to financial institutions. With enforcement already underway, timely compliance is essential to sidestep these risks.
Final Thoughts
The approaching CTA filing deadline highlights the importance of proactive compliance for reporting companies. Our previous article provides a foundation for understanding the law’s scope and the necessary steps for CTA reporting. As January 1 approaches, reach out to legal professionals for a final compliance check if needed, and make sure your organization has all reporting requirements in place to avoid penalties.
Compliance with the CTA is a continuous process that will shape business practices well into the future. Now is the time to act to protect your business from potential repercussions and contribute to a more transparent, secure financial environment.
Disclaimer: This article is made available by Sterlington for informational purposes only. It is not intended to provide specific legal advice and should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Using this website does not establish any attorney-client relationship between Sterlington and yourself.
