With the Corporate Transparency Act (CTA) now in effect as of January 1, 2024, it’s important to consider if Beneficial Ownership Information (BOI) reporting is on your to-do list this year. Many of our clients are impacted by this new requirement, so here’s a streamlined guide to help you determine if you need to report and how to get it done.
Decoding the Terminology
FINCEN: The Financial Crimes Enforcement Network, a division of the U.S. Treasury, manages the BOI reporting process.
CTA: The Corporate Transparency Act, enacted by Congress in 2021, is designed to increase transparency around company ownership.
BOI: Beneficial Ownership Information, which refers to the details about individuals who own or control a company. This is the specific data you’ll be reporting under the CTA.
Purpose of the CTA
The CTA aims to make it harder for bad actors to hide their identities within shell companies or complex ownership structures, creating a more transparent business environment.
Does My Business Need to File?
I suggest checking the guidelines on the www.Fincen.gov/boi website, where you can find excellent information. However, if your company is a corporation, LLC, or similar entity created in the U.S. (or a foreign company registered to operate in the U.S.), you will likely need to file.
The CTA does exempt certain types of entities—largely in banking and finance. Since most ecommerce businesses fall outside these exemptions, this reporting likely applies to you.
For more guidance, visit the FinCEN BOI website, which includes a Small Entity Compliance Guide. Page 1 of this guide provides a helpful decision tree to assess your requirements, and page 4 lists exempt entities.
What Qualifies as a Beneficial Owner?
A beneficial owner is an individual who either:
- Directly or indirectly has substantial control over a reporting company, or
- Owns or controls at least 25% of the company’s ownership interests.
There’s no maximum number of beneficial owners. For clarity on identifying beneficial owners, consult page 16 of the Small Entity Compliance Guide, which includes definitions for substantial control and ownership interest.
Information to Report
You’ll need:
- Business details: Full legal name, DBA (if applicable), address, and Taxpayer ID or Employer ID.
- Beneficial Owner details: Legal name, birthdate, current address, and a unique identifying number (such as a passport, driver’s license, or another government-issued ID), for each Beneficial Owner.
Refer to page 38 of the Small Entity Compliance Guide for a full checklist.
Filing Deadlines
Starting in 2025, filing deadlines may change, so it’s a good idea to handle this alongside your annual tax prep. For 2024, the deadlines are:
- Business established before January 1, 2024: You have until the end of 2024 to submit your BOI.
- Business established on or after January 1, 2024: You must file your BOI within 90 days.
Consequences of Not Reporting
Failure to report could lead to severe penalties, including:
- Civil fines up to $500 per day for ongoing violations.
- Criminal penalties, including up to two years in prison and fines of up to $10,000.
Additionally, senior officers may be held responsible if their entity fails to file on time.
How to File
You can file electronically through FinCEN’s BOI E-Filing website. The process may feel intimidating because it’s new, but our step-by-step BOI Reporting Guide will walk you through filing. It’s best to tackle it now before you get wrapped up in the busyness of Q4 and Holiday Season.
Take Action
While this blog offers a straightforward overview of the CTA requirements, action is essential on your part to avoid penalties. Please refer to the resources linked above to ensure your business meets all obligations.
Schedule a free consultation with our team today to learn how we can support your exit planning journey. Contact us to get started!
Leave a Comment