Effective January 1, 2024, corporations, limited liability companies, and other business entities formed by registering with their state must register their business owner information with a federal agency. If this is you, keep reading.
The Corporate Transparency Act 2024 has been a long time coming. For almost two decades, the government has considered identifying business owners to combat money laundering. Typically, money launderers use shell companies where the actual business owner remains unknown to the public, banking authorities, and the government.
The Act requires “recording companies,” aka corporations, limited liability companies, and other business entities formed by registering with a state agency, to report company information, beneficial owner information (“BOI”), and information regarding the person who originated the company with FinCEN.
Company information includes:
- The legal name of the company
- Any trade name the company uses
- The current street address of its principal place of business
- Taxpayer identification number
Beneficial owner information includes:
- The individual legal name, date of birth, and complete current residential address
- Their unique identifying number (social security number, driver’s license, passport, etc…)
- The name of the state that issued the identification document that provided the number
- An image of the identification document
Company applicant information includes the same as the BOI, except if the person forming the business is doing it as part of their employment, they will provide the business address rather than their residential address.
By now, you want to know three things: who is a beneficial owner, who is a company applicant, and are there any exceptions to this thing? A beneficial owner is any individual (1) who directly or indirectly exercises substantial control over the reporting company, or (2) who directly or indirectly owns or controls 25% or more of the “ownership interests” of the reporting company.
The company applicant is limited to two individuals: either the individual directly submitting the document that creates the entity or the individual primarily responsible for directing or controlling another to submit the relevant documents.
There are 23 exceptions to the Corporate Transparency Act 2024; however, it is essential to note that while having tax exception status is one of them, being a small or micro business is not.
Reporting companies formed by December 31, 2023, have until January 1, 2025, to report company and beneficial owner information. (They do not have to file company applicant information). Reporting companies filed on or after January 1, 2024, must report their company, beneficial owner, and company applicant information within 30 days after receiving actual or public notice that the company is registered.
There is no fee to file the required reports; however, failure to report or willfully providing false information could result in civil penalties, imprisonment for up to two years, and/or fines up to $10,000.
This article is a summary of the Corporate Transparency Act of 2024 and how it applies to domestically formed businesses. For more information, read the Small Entity Compliance Guide.
