The Corporate Transparency Act (CTA) has introduced new reporting requirements that significantly impact both domestic and foreign entities operating in the United States. As of January 1, 2024, the CTA mandates that certain companies must report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). This legislation aims to enhance transparency and curb illicit activities by making it harder for individuals to use companies to conceal their assets and identities. Here’s what you need to know about the CTA and how to comply with its requirements.
Understanding the Corporate Transparency Act (CTA)
The CTA requires reporting companies, including C corporations (1120), S corporations (1120-S), and certain self-employed individuals with Schedules C, to disclose information about their beneficial owners. A beneficial owner is defined as any individual who, directly or indirectly, exercises substantial control over the reporting company or owns or controls at least 25% of the ownership interests of the reporting company. Certain individuals are exempt from this definition, as detailed in 31 U.S.C. §5336(a)(3)(B).
Reporting Deadlines Under the CTA
Entities that were created or registered before January 1, 2024, have until January 1, 2025, to file their initial BOI reports. For entities established or registered on or after January 1, 2024, the deadline to submit BOI reports is within 90 days of their creation or registration.
What Information Must Be Reported?
The initial BOI reports must include the following information about the reporting company and its beneficial owners:
Legal name, trade name, and any doing business as (DBA) names
Address of the principal place of business
Jurisdiction of formation or registration
Tax identification number (TIN)
For each beneficial owner and company applicant:
Legal name
Date of birth
Current residential or business street address
An identification number from a state or federally recognized document (e.g., passport, driver’s license)
An image of the identification document
Updating BOI Reports
Reporting companies are required to update their BOI reports within 30 days of any change in beneficial ownership or company applicant information. This includes changes to the identifying details previously submitted.
Filing BOI Reports
It is important to note that BOI reports cannot be filed using tax software or any other software vendor. Instead, these reports must be filed directly through the FinCEN BOI website. For further guidance, refer to the FinCEN BOI FAQ page.
The CTA represents a significant shift in the reporting landscape for businesses in the United States. Compliance with these new requirements is crucial to avoid penalties and ensure transparency. Entities should take proactive steps to gather the necessary information and understand the process for filing BOI reports with FinCEN.
Have a question about your situation?
Our team can review your records and explain your options.
Schedule a ConsultationThis article is for general information only and is not tax or legal advice for your specific situation.