The Corporate Transparency Act and BOIR Requirements: What You and Your Business Need to Do Before the December 31st Deadline in Order to Avoid Being Fined
The Corporate Transparency Act (CTA) marks a significant shift in U.S. regulatory requirements for corporations, limited liability companies (LLCs), and other entities. Its primary objective is to increase transparency in business ownership, deter financial crimes, and prevent the misuse of shell companies for illicit activities. As part of this effort, the Beneficial Ownership Information Reporting (BOIR) requirements mandate entities to file key ownership data with the Financial Crimes Enforcement Network (FinCEN).
As the December 31, 2024 deadline approaches, it is critical for businesses to understand their obligations under the CTA to avoid hefty fines and penalties. Below, we provide a comprehensive guide on what you need to know and do to ensure compliance.
Understanding the Corporate Transparency Act and BOIR Requirements
What is the Corporate Transparency Act (CTA)?
The CTA, enacted in 2021, requires certain businesses to disclose beneficial ownership information to FinCEN. The law aims to:
Combat money laundering, terrorism financing, and tax evasion.
Prevent the misuse of anonymous corporate structures.
Promote transparency in financial and business operations.
What is BOIR?
Beneficial Ownership Information Reporting (BOIR) is the mechanism through which businesses submit their beneficial ownership details to FinCEN. This information includes data about individuals who own or control at least 25% of the company or exercise significant influence over its operations.
Who is Required to Report?
Almost all businesses. Most domestic and foreign entities registered to do business in the U.S. must file under BOIR. This includes:
Corporations.
LLCs.
Limited Partnerships.
Other similar entities created by state or tribal filings.
Exempt Entities
Certain entities are exempt, usually if they are already subject to additional filing requirements, such as:
Publicly traded companies.
Large operating companies with more than 20 employees, over $5 million in annual revenue, and a physical presence in the U.S.
Banks, insurance companies, and other regulated entities.
It’s essential to verify whether your business qualifies for an exemption to avoid unnecessary filings. Where in doubt, assume your business needs to file.
What Information Needs to Be Reported?
Under BOIR, businesses must submit the following details for each beneficial owner:
Full Legal Name.
Date of Birth.
Current Residential or Business Address.
A Unique Identifying Number (such as a passport or driver’s license number).
Photocopy of the Identification Document.
For entities created after January 1, 2024, this information must also include details about the entity's incorporators (referred to as “company applicants”).
Key Deadlines to Remember
For Existing Entities: Businesses created before January 1, 2024, must file their reports by December 31, 2024.
For New Entities: Entities formed on or after January 1, 2024, must file their reports within 30 days of formation.
Updating Information: Any changes in beneficial ownership or other reported details must be updated within 30 days of the change.
Penalties for Non-Compliance
Failing to comply with BOIR requirements can result in severe penalties, including:
Civil Penalties: Up to $500 per day for non-compliance.
Criminal Penalties: Fines of up to $10,000 and/or imprisonment for up to two years for willful violations.
The repercussions of non-compliance extend beyond fines. Businesses may also face reputational damage and increased scrutiny from regulators.
Steps to Ensure Compliance
1. Determine Reporting Obligations
Assess whether your business qualifies as a “reporting company” under the CTA.
Verify if your entity qualifies for any exemptions.
2. Identify ALL Beneficial Owners
Review ownership structures to identify individuals who meet the 25% ownership or significant control criteria.
3. Gather Required Information
Collect accurate and complete details for all beneficial owners and company applicants (if applicable).
4. Ensure that Your Report is Filed with FinCEN
Have your experienced legal or tax professional use the FinCEN filing system to submit the required information securely. The portal will provide instructions for completing and submitting BOIR filings.
5. Develop a System for Updates
Establish internal processes to monitor changes in ownership or control.
Ensure updates are filed with FinCEN within the 30-day window.
6. Consult Legal Counsel
Given the complexity of the CTA and BOIR requirements, seeking professional legal advice is highly recommended. A qualified attorney can help:
Navigate the nuances of compliance.
Clarify whether exemptions apply.
Ensure accurate and timely filings. Many filings done independently result in rejections. Don’t be rejected past the December 31st deadlines for filing!
How Our Law Firm Can Help
At Elkhalil Law, we understand that complying with the CTA and BOIR requirements can be overwhelming. Our team is here to help businesses navigate these new regulations with confidence. Our services include:
Compliance Assessments: Determine whether your business is subject to BOIR requirements.
Ownership Structure Reviews: Identify beneficial owners and company applicants.
Filing Assistance: Prepare and submit your BOIR report to FinCEN.
Ongoing Compliance Support: Monitor changes and file updates as needed.
Act Now to Avoid Penalties
The December 31, 2024 deadline is fast approaching, and non-compliance could result in severe financial and legal consequences. Don’t wait until the last minute—ensure your business is fully compliant with the CTA and BOIR requirements.
If you need assistance, please contact us today to schedule a consultation and let us help you meet your reporting obligations. Compliance is not just a legal requirement; it’s a vital step in protecting your business’s future.