Beginning on January 1, 2024, most U.S. companies, LLCs, LLPs, and other entities will be required to report ownership information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, to comply with the new Act called the Corporate Transparency Act (CTA). FinCen calls the reporting requirement Beneficial Owners Information (BOI) Reporting. Entities will have to identify their “Beneficial Owners,” the individuals who ultimately own or control the company. The penalty for willfully not filing or filing false information is $500 per day. Possible criminal penalties are fines up to $10,000, imprisonment for up to two years, or both.

Is the Beneficial Ownership filing part of your tax return? No. Beneficial Ownership filing is not with the IRS and is not part of your tax return. Filing is a separate reporting requirement with FinCen outside the scope of your tax filings.

What is the purpose of the new law? FinCEN is requiring this “Beneficial Ownership Reporting” to create a database to combat fraud, money laundering and terrorism.

Who does the law apply to? In general, the Act applies to most U.S.-formed entities, corporations, limited liability companies (LLCs), limited partnerships, and other entities formed with the Secretary of State or a similar office. In addition, certain foreign-owned entities doing business in the States are subject to the law. 25 types of entities are exempt from filing, including exempt entities, publicly traded companies, banks, credit unions, and public utilities. Please check FinCen for the complete list of entities exempt from filing. Also, the law does not apply to a business operating as a general business or partnership that was not created by forming with the state.

What is required to be reported? The report requires companies to provide information on any individual who, directly or indirectly, exercises substantial control over the company, and owns or controls at least 25% of its ownership interests. Substantial control could include an officer, decision maker, authority to appoint or remove officers or directors, or any other form of substantial control of the entity based on the FinCen rules. If your voting percentage is higher than your ownership percentage, you should get advice, because you may have more effective control than your ownership percentage.

When is the due date for filing? For companies established before December 31, 2023, the deadline for reporting is January 1, 2025. Those created on or after January 1, 2024, must file within 30 days of initial registration of the business.

For more information on the FinCen Beneficial Ownership Information reporting requirement, please use the links below:

• General: www.fincen.gov/boi
• Small Businesses: www.fincen.gov/boi/small-business-resources
• FAQ: www.fincen.gov/boi-faqs