As of January 1, 2024, millions of small businesses are required to file a Beneficial Ownership Information (BOI) Report with the Financial Crimes Enforcement Network (FinCEN) of the US Department of Treasury. This requirement was imposed by Congress through the Corporate Transparency Act (CTA), with FinCEN issuing regulations about who must file, when to file, and what information to report. Every small business owner must know about this reporting requirement, as non-compliance can lead to severe penalties. 

What Is the Corporate Transparency Act?

The Corporate Transparency Act, which came into effect in 2021, aims to tackle illicit activities such as tax fraud, money laundering, and terrorism financing by collecting ownership information for certain United States businesses that operate in or have access to the country's market. According to Congress, collecting beneficial ownership information is necessary to protect the country and counter this illegal activity.

As of 2024, companies that meet specific criteria must submit a BOI report to FinCEN. The report must include details that identify individuals associated with the reporting company.

Who Will The New Corporate Transparency Act Impact?

The CTA will affect corporations and entities across the United States and those who control and own these businesses. This includes:

• Every business, corporation, LLC, and other legal entity created by filing a document with a Secretary of State or similar office needs to determine whether it is a Reporting Company under the New Corporate Transparency Act or falls within an exemption. 
• If a company is a Reporting Company, it must identify its Beneficial Owners and Company Applicants.
• A trustee will be considered a Beneficial Owner of a Reporting Company if the trust owns more than 25% or more of the Reporting Company.
• Lawyers and other service providers involved in forming new businesses after January 1, 2024, may be considered Company Applicants. 

Who Is Considered a Beneficial Owner of a Business?

The CTA defines a beneficial owner as an individual who owns a significant stake in a company, either directly or indirectly. Such a person substantially impacts the company's decisions or operations, owns at least 25% of the company's shares, or has similar control over the company's equity.

What Information Needs To Be Provided?

Reporting Companies will typically need to provide four pieces of information about each of their beneficial owners. This information includes:

• Name
• Address
• Date of Birth and
• The identifying number and issuer from an acceptable identification document, including a driver's license or passport

If the required documents are not available, a foreign passport that is valid may be able to be used instead. The entity should also provide specific information about itself, such as its name(s) and address. Moreover, any Reporting Companies established on or after January 1, 2024, must provide details about the individuals who formed the company, known as Company Applicants.

Contact The CYA Law Firm To Learn More About the New Corporate Transparency Act

Compliance with the CTA may create new burdens for legitimate businesses, and meeting disclosure requirements can prove challenging for some entities. That is why if you want to know whether the CTA applies to you, contact the CYA Law Firm today and schedule your free consultation with Attorney Adalbert “AL” Martinez to learn more about the Corporate Transparency Act and your options.