Understanding The New BOI Reporting Requirements

Introduction

The Corporate Transparency Act (CTA) has ushered in significant changes related to businesses and the reporting of beneficial ownership information (BOI). This blog post will delve into the intricacies of the new reporting requirements set forth by the Financial Crimes Enforcement Network (FinCEN) and discuss their implications, especially for business owners.

Background Of The Corporate Transparency Act

The CTA was passed by Congress in 2021 and officially went into effect as law on January 1, 2024, as 31 U.S.C. § 5336. It was designed to combat financial crimes by making it more difficult for individuals to use shell companies and similar structures for illegal purposes. It mandates that reporting companies submit certain information about the business, the business applicant, and each beneficial owner of the business. The power to oversee the reporting was delegated by Congress to the Department of the Treasury, and subsequently FinCEN, an arm of the Department.

Impact On Businesses

Companies required to report are called reporting companies. Reporting companies include 1) corporations, limited liability companies (LLC), and any other types of business entities created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe; and 2) foreign companies registered to do business in any U.S. state or Indian tribe by such a filing.

Conversely, there are twenty-three types of entities that are exempt from beneficial ownership information reporting requirements, including publicly traded companies, nonprofits, banks, and credit unions. If your business is not exempt, then it MUST report, regardless of industry, trade, or how long it has been in existence.

Deadlines

FinCEN began accepting reports on January 1, 2024. If your company was created or registered prior to January 1, 2024, you will have until January 1, 2025 to report. If your company is created or registered in the year 2024 (January 1, 2024 – December 31, 2024), the BOI report needs to be submitted within 90 calendar days after receiving actual or public notice that the company’s creation or registration is effective, whichever is earlier. Lastly, if the company is created or registered on or after January 1, 2025, the BOI report must be filed within 30 calendar days after receiving actual or public notice that its creation or registration is effective.

Any updates or corrections to beneficial ownership information that you previously filed with FinCEN must be submitted within 30 days.

As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may face penalties of up to $500 for each day that the violation continues. That person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. The reporting entity can also be subject to similar penalties.

Conclusion

The new BOI reporting requirements under the Corporate Transparency Act are a change in corporate governance that impacts almost every business. If you have questions about or need assistance in completing and submitting your business’s BOI report, please contact our business law team at 701.297.2890 or email at info@swlattorneys.com

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