The Corporate Transparency Act (CTA) was passed in 2020 for the purpose of combating financial crimes including tax fraud, money laundering, and financing for terrorism, among others. Effective January 1, 2024, the CTA requires certain businesses to file Beneficial Ownership Information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN). The deadline for businesses formed before January 1, 2024, is December 31, 2024, while those formed after that date must file within 90 days of their creation.
BOI Reporting and Compliance Penalties
The BOI report must include a company’s legal name, any trade names, its principal U.S. address, and its taxpayer identification number. Additionally, information about each beneficial owner—such as their full name, date of birth, residential address, and identifying documentation (including the issuing jurisdiction)—is required. Updates to BOI filings are mandatory within 30 days of any change in beneficial ownership or associated identifying information.
Failure to comply with the CTA can lead to significant penalties. Entities may face civil fines of up to $500 per day for ongoing violations, with possible criminal penalties that include fines up to $10,000 and imprisonment. Filing false or fraudulent information or willful failure to update filings are particularly severe violations under the law.
Which Entities Must Report?
The CTA applies to corporations, limited liability companies (LLCs), and other organizations created by filing with a state or similar authority. Entities with fewer than 20 full-time employees and less than $5 million in gross revenue are included, plus domestic reporting companies and foreign entities registered to do business in the U.S.
The law excludes sole proprietorships, general partnerships, certain trusts, and other organizations like tax-exempt “large operating companies” with $5 million in gross annual receipts from U.S. operations and more than 20 full-time employees.
Who Qualifies as a Beneficial Owner?
A “beneficial owner” is defined as an individual with significant control over a reporting company, such as an officer, manager, or someone owning 25% or more of the company. This broad definition ensures that all key decision-makers and stakeholders are identified to prevent misuse of corporate entities for illicit activities.
How Sassoon Cymrot Law Can Assist
Navigating these new requirements can be complex, but Sassoon Cymrot Law LLC is here to help. Our team guides clients through the BOI filing process, ensuring compliance with FinCEN’s Beneficial Ownership Secure System (BOSS). We also educate businesses on scams and misinformation.
Staying compliant with the CTA is not an annual obligation, rather businesses must remain vigilant. Regular updates are required when beneficial ownership changes occur. Contact our taxation team to learn more about how we can help your company meet its obligations under the Corporate Transparency Act.
