Act Now to Comply with the Corporate Transparency Act

The Financial Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Department of Treasury, has issued its final rule (the “Rule”) implementing the beneficial ownership information (“BOI”) reporting requirements of the Financial Corporate Transparency Act (the “Act”) that impacts millions of privately owned companies.

The Act aims to enhance financial transparency and prevent illicit activities, such as money laundering and terrorism financing, by requiring certain companies (each a “Reporting Company”) to disclose accurate and up-to-date beneficial ownership information to FinCEN. The Act covers a broad range of entities including, but not limited to:

• Entities that own real estate assets;
• Investment vehicles set up by individuals; and
• Smaller private companies and joint ventures.

Under the Act, Reporting Companies that do not qualify for an exemption are required to file a BOI report that includes certain required information about their Beneficial Owners. 

Here are some brief answers to commonly asked questions about the Corporate Transparency Act:

Whom must a Reporting Company report?

• Beneficial Owners and Company Applicants.

Who is a Beneficial Owner?

• Individuals that own or control at least 25% of a company’s ownership interest and individuals that have substantial control over a company’s operations (such as Directors, Presidents, CEOs, Vice-Presidents, and other officer positions).

Who is a Company Applicant?

• A person that files documents to form your entity or directs the filing of those documents.
• Only entities formed after January 1, 2024, are required to report their company applicant.

What information must be provided about the Beneficial Owners?

• A BOI Report requires the full legal name, date of birth, residential street address, and an identifying number (such as driver’s license or passport with a photocopy of the applicable document) of each Beneficial Owner, or alternatively, individuals can obtain FinCEN Numbers which can be used on each BOI Report.

How do I make these BOI reports?

• FinCEN has established an online portal that Reporting Companies use to electronically file BOI reports.

When do I have to make these reports?

• For Reporting Companies created on or after January 1, 2024, BOI reports are due within 90 days of formation (for U.S. entities) or registration (for non-U.S. entities).  It is anticipated that this 90-day period will be reduced to 30 days beginning in January of 2025. For Reporting Companies formed before January 1, 2024, the initial BOI report is due no later than January 1, 2025.

What Companies are exempt from reporting?

• Companies that are already subject to substantial federal reporting requirements (i.e., public companies, banks, insurance companies, etc.).
• Operating companies in the U.S. with 20 or more full time employees having filed a federal tax return for the previous year showing US$5 million in gross income from US sources.
• Completely inactive companies.

What are the penalties if I fail to timely report?

• Failure to comply with the reporting requirements or providing false information can lead to criminal fines of up to $10,000 and/or up to two years imprisonment. Civil penalties include a fine of $500 per each day of non-compliance.

How can companies prepare?

• FinCEN released a Small Entity Compliance Guide, which provides basic information on filing out a BOI Report, and you can access additional information on the FinCEN BOI website.

We recommend that you keep a close eye on further developments related to the Act, as additional guidance and regulations are continually issued. It is also important to consult legal and financial professionals to understand how the Act specifically impacts your business.

BoyarMiller is committed to assisting you in navigating this new regulatory environment. If you have any immediate questions or concerns, please do not hesitate to reach out to our dedicated team at 713.850.7766 or visit our website at boyarmiller.com.