What Small Business Owners Need to Know About the Corporate Transparency Act and Beneficial Ownership Information (BOI)

Did you know that the United States is a haven for money-laundering, tax evasion and other corrupt financial activities? Until recently, it was one of the few places where a company could hold real estate assets without having to disclose who the owners were. This allowed bad actors to hide their identities and move money through the UUS financial system. There were very few regulations requiring the identification of company owners and it was very hard for authorities to track the criminals.

(For a deep and compelling review of the politics and history of this issue, read Heather Cox Richardson’s Letters from an American here.)

In 2021, the Corporate Transparency Act was passed, requiring most corporations and LLCs to file information about their “beneficial owners” with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of Treasury.

The filing requirements were delayed for three years while the regulations were written and finalized. Now the law is taking effect.

Starting on January 1, 2024, newly formed or registered reporting companies in the U.S. will have 90 days to report BOI, certain entity information about the reporting company and company applicant information to FinCEN.

Existing reporting companies will have until January 1, 2025 to provide company and beneficial owner information, but they will not have to provide information on the people who formed the companies (company applicants).

All reporting companies have an ongoing obligation to submit updates for changes in any filed information within 30 days of the change.

If you don’t report this information, you could be liable for serious civil or criminal penalties, including thousands of dollars in fines or a prison sentence. The penalties for noncompliance include:

Assessment of a $500-per-day fine every day the violation continues (up to $10,000).
Up to a two-year prison sentence.

Legal Direction is able to assist small business owners determine if they are a reporting entity, and in the coming weeks we will post more information about this act and what it requires.

Here is the Small Entity Compliance Guide from FinCEN.