What to know about Corporate Transparency Act reporting

In 2021, Congress voted the Corporate Transparency Act into law, which was passed to enhance transparency in entity structures and ownership to combat money laundering, tax fraud, and other illicit financial activities. And on January 1, 2024, the law’s reporting requirement for beneficial ownership information, or BOI, will go into effect. Here, we’ll give you a brief overview of the law and its requirements, then share some resources to help you get up to speed with compliance.

About the Corporate Transparency Act

Put simply, the Corporate Transparency Act requires many small and midsized companies to report information about their company’s “beneficial owners” — i.e., individuals who own 25% or more of the company or have substantial control over it — to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). Failure to do so could result in fines and/or time in prison. 

The goal of the CTA and the BOI requirements is not to make life harder for small businesses, but rather to prevent bad actors from using small shell companies to hide their identity or illicit activities.

BOI reporting requirements rundown

FinCEN aims to make the reporting process as easy to navigate as possible. Here are a few handy pointers and guidelines to be aware of as you start the reporting process:

• Your company may be required to report BOI if it is a corporation, LLC, or any entity created by filing a document with a secretary of state or similar office, whether domestic or foreign.
• There are 23 types of entities that are excluded from reporting requirements, including publicly traded companies, nonprofits, and other large entities.
• Other legal entities, including certain trusts, may be excluded from the registry if they are not required to file with a secretary of state or similar office.
• Reporting must be done electronically through FinCEN’s website, which will provide a confirmation of receipt once your completed report is filed.
• Reporting will begin on January 1, 2024. If your company was created or registered prior to that date, you will have until January 1, 2025, to report your BOI. Companies created or registered in 2024 must report BOI within 90 days of creation or registration; companies created in 2025 or after will be required to report within 30 days.
• Additionally, any updates or corrections to beneficial ownership information that was previously filed with FinCEN must be submitted within 30 days.

Helpful resources

This article isn’t intended to be a deep dive on the Corporate Transparency Act or beneficial ownership information, but rather a high-level look at the regulations that are going into effect soon so that you can start gathering the information you need to remain in compliance. For more in-depth information on the CTA or BOI reporting requirements, here are a couple of helpful resources:

• The FinCEN website features a roundup of helpful FAQs that are worth perusing if you have questions — chances are, you may be able to find answers here.
• FinCEN also provides a handy Small Entity Compliance Guide that walks you through the basics of staying compliant with the new BOI reporting regulations.
• The FinCEN website also features a couple of informational videos, as well as additional reference materials and the ability to subscribe to a mailing list for updates.