skip to Main Content
business woman standing in a conference room window

Corporate Transparency Act: Answering The Important Questions

In an effort to combat money laundering, terrorism financing, and other illicit activities, Congress passed the Corporate Transparency Act (CTA) in 2021. Beginning in 2024, the CTA requires most small and medium sized entities to electronically file a report disclosing entity structure and ownership information, also known as “Beneficial Ownership Information” (BOI), of the respective entity. 

Who must file? 

  • Domestic entities who were created by filing a document with the secretary of state or similar office under the law of a state or Native Tribe are subject to this reporting. Reporting companies include corporations, limited liability companies (“LLCs”) (including single-member LLCs), Limited Partnerships, and Business Trusts.
  • Foreign entities, such as a corporation, LLC or other entity formed under the law of a foreign country, that is registered to do business in any U.S. state or Tribal jurisdiction by filing a document with a secretary of state or any similar office, are subject to this reporting.
  • There are numerous exemptions to this filing. Below are the most notable exemptions. (However, refer to the “Ongoing Compliance” section below.)
    • Certain specified companies (refer to FAQ C.2. at the website fincen.gov/boi-faqs for a list of the exempt entity types)
    • Tax-exempt entities
    • Any business concern that meets ALL of the following requirements:
      • employs more than 20 employees on a full-time basis
      • files income tax returns with more than $5,000,000 in annual gross receipts or sales
      • has an operating presence at a physical office in the U.S.

What Information is Required? 

The owners of the entity must report their name, date of birth, address, and unique identifier number from a recognized issuing jurisdiction and a photo of that document (such as an unexpired driver license or U.S. passport.) If the owner is a minor child, the parent’s or guardian’s information will be reported in place of the minor child’s information. There are exceptions to reporting certain owners. However, because of the complexity of properly identifying owners who are not required to be reported, along with potential penalties for non-compliance, we recommend that all owners be reported.

What is the Due Date?

For those entities in existence on December 31, 2023, the entity has until December 31, 2024 to submit their report. Those entities created during the calendar year 2024 will have 90 calendar days to submit initial reports. Entities created after December 31, 2024, will have 30 calendar days to submit initial reports.

Ongoing Compliance

The entity is required to update the information within 30 days of any changes of ownership. Some examples include: a sale, acquisition, merger, gift, or death. Additionally, if the entity met one of the filing exemptions initially, but subsequently does not meet the requirements for exemption, the entity must file the report within 30 days of the event that caused the entity to not meet the exemption.

Cautions

Non-compliance can result in penalties and possible imprisonment. The fines range from $500 to $10,000 per violation and jail time up to two years. 

Because the information you provide is sensitive in nature, we anticipate scam artists soliciting businesses to file these reports on their behalf. We highly recommend that you only provide information to someone you personally know.

Conclusion

The information provided in this blog is current as of the date of this blog. There may be changes to these requirements which you will need to monitor.

Since this filing is considered a legal filing with the Financial Crimes Enforcement Network (FinCEN), and not a filing with the Internal Revenue Service, we, as accountants, are unable to file the report on your behalf. You will need to either file the report yourself or ask your legal counsel to file it on your behalf. Since we realize not all entities have on-going legal counsel, we contacted local law firms who are willing to assist our clients. If you are interested, please contact us and we will provide you with their information.

Though we are unable to file the report for you, we are available for questions. Please do not hesitate to reach out to us.

Author: Rhonda Sibley, CPA, AEP

Back To Top