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New Federal Corporate Reporting Requirement: Have You Filed Your BOI Yet?

Ward Damon

Feb 2024

New disclosures to the federal Corporate Transparency Act (CTA) now require an additional reporting requirement for “reporting companies” -- most U.S. corporations, limited liability companies and certain other entities in the United States. These companies are required to report their beneficial ownership to the Financial Crimes Enforcement Network (FinCEN) by filing an application, which will be saved in a federal database that can be accessed by the IRS, law enforcement and other agencies. FinCEN is part of the U.S. Department of the Treasury.

The CTA was passed as part of the National Defense Authorization Act of 2021 to help the U.S. government prevent money laundering, tax evasion, financing of terrorism, human and drug trafficking, securities and financial fraud, and foreign corruption.

These mandated disclosures came into effect January 1, 2024, and the deadline for filing your Beneficial Ownership Information Report (BOI) depends on the date your reporting company was formed or registered. Specifically:

  • A reporting company formed or registered before January 1, 2024 must file by January 1, 2025.
  • A reporting company formed between January 1, 2024 and January 1, 2025 has 90 calendar days to file their initial report.
  • A reporting company formed after January 1, 2025, must file within 30 days of the date of actual or public notice of creation or registration.

This additional layer of reporting can be significant for businesses, particularly smaller entities that have not yet invested in more substantial record keeping and compliance. It’s important to know the specifics, or enlist a professional who can ensure your business is meeting these new federal requirements.

When filing the BOI report, a reporting company with its principal place of business in the U.S. must use the street address of that principal place of business. In all other cases, the street address of the primary location in the U.S. where the reporting company conducts business is to be used. A third-party address or P.O. box address is not allowed.

Who counts as a beneficial owner and what do they need to report?

A beneficial owner is as any individual who, directly or indirectly, exercises “substantial control” over the entity or owns or controls not less than 25 percent of the ownership interests. The reporting company must provide to FinCEN the following information for each beneficial owner:

  • Name
  • Date of birth
  • Current residential or business address
  • A unique identifying number from an acceptable, nonexpired identification document (such as a U.S. state driver’s license or a U.S. or foreign passport).

Exclusions to the definition of a beneficial owner include a minor child, an individual acting as a nominee, intermediary, custodian, or agent on behalf of another individual, and an individual acting solely as an employee and whose control over or economic benefits from such entity is derived solely from the employment status of the person.

It’s important to note that there are currently 23 types of entities that are exempt from the definition of “reporting company” under the CTA, meaning they are not required to file a BOI report.  Some examples include publicly traded companies, various types of financial institutions, accounting firms, insurance companies, utilities, government authorities and tax-exempt entities.

Failing to file the BOI report by the required deadlines or providing false information can carry hefty penalties, including up to $500 for each day that the report remains unfiled, monetary fines up to $10,000, and two years in prison.

For more information and to file the required BOI report, please visit https://www.fincen.gov/boi.

 

Ward Damon is here to help you ensure compliance with the Corporate Transparency Act, and guide you through all business registration matters. Please email Cathleen Ward, partner, at cward@warddamon.com, or Marissa Shulman, associate, at mshulman@warddamon.com for consult. This post does not constitute legal advice.

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