Corporate Transparency Act: What You Need to Know

The U.S. Department of the Treasury, through the Financial Crimes Enforcement Network (FinCEN), has implemented new reporting requirements for beneficial ownership information (BOI) as a result of the Corporate Transparency Act passed by Congress in 2021. This legislation aims to enhance the transparency of corporate structures, making it more challenging for individuals with illicit intentions to conceal or profit from their gains through entities like shell companies.

Commencing on January 1, 2024, numerous companies operating in the United States will be obligated to disclose information about their beneficial owners—the individuals ultimately holding or controlling the company. This information must be reported to FinCEN, a bureau operating under the U.S. Department of the Treasury.

Entities subject to these reporting requirements are termed “reporting companies.” They include corporations, limited liability companies (LLCs), or those formed in the U.S. through filings with a state or tribal office. Additionally, foreign companies registered to conduct business in any U.S. state or Native American tribe through similar filings fall under the reporting obligations.

Certain entities, such as publicly traded companies, nonprofits, and specific large operating companies, are exempt from the BOI reporting requirements. A comprehensive list of the 23 exempt entity types is available in FinCEN’s Small Entity Compliance Guide, providing checklists to determine eligibility for exemption.

Reporting companies must submit their beneficial ownership information electronically via FinCEN’s website (www.fincen.gov/boi). The system will generate a confirmation of receipt once the report is successfully filed.

The reporting timeline varies based on the creation or registration date of the company:

• Companies established or registered before January 1, 2024, have until January 1, 2025, to submit BOI.
• Companies created or registered between January 1, 2024, and January 1, 2025, must report BOI within 90 calendar days of effective creation or registration.
• Companies created or registered on or after January 1, 2025, must file BOI within 30 calendar days of receiving notice of effective creation or registration.
• Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports — must file within 30 days.

It’s important to note that FinCEN cannot accept reports prior to January 1, 2024. Penalties for willfully not complying with the BOI reporting requirement can result in criminal and civil penalties of $500 per day and up to $10,000 with up to two years of jail time.

Beware of Unsolicited E-mails and Letters from FinCEN

With this new process, fraudsters have found an opportunity to fool business owners and entities into handing over their financial information. They’re sending fake communications with titles like “Important Compliance Notice” and including a link or a QR code. Those e-mails or letters are phishing attempts. FinCEN will not send unsolicited requests. Please do not respond to these fake messages, or click on any links or scan any QR codes within them.

You can learn more by visiting www.fincen.gov/boi.