December 3rd, 2024
Posted By
Shawn M. Peddycord

If your inbox feels full of emails about BOI (Beneficial Ownership Information) under the CTA (Corporate Transparency Act), you are not alone. The CTA requires certain businesses to file detailed reports with the Financial Crimes Enforcement Network (FinCEN) to disclose ownership and control structures. The goal? To combat money laundering and other financial crimes.

What is the Corporate Transparency Act?

The CTA is a federal law designed to increase transparency in business ownership. It applies to many LLCs, corporations, and other entities--including those owned by other companies or trusts. Affiliates and subsidiaries may also have reporting obligations.

Some entities are exempt. The most common exemptions include:

  • Companies with 20 or more employees and over $5 million in revenue
  • Tax-exempt organizations (e.g. 501(c)(3) nonprofits)
  • Regulated entities such as banks

However, exemptions can be complex. A company may qualify, but its affiliates may not. Understanding how the requirements apply to your organization is essential.

What is Required?

Reporting information includes:

  1. Company Details: Business name, address, jurisdiction, and a unique ID number (such as an EIN/TIN).
  2. Beneficial Owners: Names, dates of birth, residential addresses, and ID copies (such as a driver’s license or passport) for individuals with significant ownership (25% or more) or control.

“Control” refers to individuals who can directly or indirectly exert significant influence over a company, such as officers (for corporations) or managers (for LLCs).

Penalties

Non-compliance carries steep penalties: $500 per day, up to $10,000 in criminal fines, and possible jail time. Eye rolls aside, someone will eventually become the first test case, so compliance is necessary.

Key Deadlines:

  • Existing Entities: File by January 1, 2025
  • New Entities: File within 30 days of formation

Ongoing Obligations

The information must remain current. Updates are required for changes such as address updates, expired IDs, or leadership changes.

Next Steps

Every business is different, and while this is a high-level summary, the requirements may affect your organization in unique ways. Even if you believe your business qualifies for an exemption, confirm this status to avoid penalties. Seek assistance from an attorney or a compliance service like Parasec or CT Corporation to ensure accurate and timely filings.

Categories: Corporate Governance