- SUMMARY
Attention!
A significant IRS rule change has taken effect, impacting over 32 million businesses in the United States.
Known as the Corporate Transparency Act (CTA), this act requires businesses to report their beneficial owners (individuals with substantial control or ownership) to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) through a Beneficial Ownership Information (BOI) report.
Companies affected include domestic reporting companies (LLCs or corporations created through a Secretary of State) and foreign reporting companies (those registered to do business in the U.S.).
Exemptions apply to businesses with under 20 full-time employees and less than $5 million in gross annual receipts, as well as nonprofits, banks, and government entities.
Inactive LLCs created before January 1st, 2020 and earning less than $1,000 in the past 12 months are also exempt.
Beneficial owners are individuals who exert control or own at least 25% of the company.
They must be listed on the BOI report along with their personal information and supporting documents.
The deadline for filing the BOI report varies depending on when the business was established: Companies established before January 1st, 2024: Deadline is January 1st, 2025.
New companies established after January 1st, 2024: 90 days after registration or creation.
Failure to meet these deadlines can result in significant penalties: Civil fines of up to $500 per day for every day the violation continues.
Criminal penalties of up to 2 years in jail and a $10,000 fine.
To file the BOI report, businesses can use FinCEN’s BOI e-filing system.
Step-by-step instructions include providing company details, identifying beneficial owners, uploading supporting documents, and signing the certification.
It’s crucial for businesses to comply with this new rule to avoid hefty fines and potential legal consequences.
- Key Takeaways
Corporate Transparency Act (CTA) requires businesses to report beneficial owners to FinCEN.
This applies to domestic and foreign reporting companies, except those under the exemption criteria.
Beneficial owners are individuals with substantial control or ownership (25% or more).
Their personal information and supporting documents must be included in the BOI report.
Failure to comply with CTA can result in significant penalties, including civil fines and criminal penalties.
The deadline for filing varies based on the business’s establishment date, with companies established before January 1st, 2024 having a deadline of January 1st, 2025.