In 2020, the United States government passed an updated version of its long-standing Anti-Money Laundering Act, modernizing the way federal agencies could combat money laundering and other financial crimes. As a result of these policy updates, Congress enacted the Corporate Transparency Act (CTA) with bipartisan support in early 2021.
The law took effect on January 1, 2024. The scope of the law is broad, and its implications are significant.
A Reporting Company is defined by FinCEN as any entity created or registered in the US by the filing of a document with a secretary of state or any similar office under the laws of a state or Indian tribe. Two types of reporting companies exist: Domestic and Foreign.
Entities formed under the laws of a U.S. state or tribal jurisdiction.
Entities formed under the laws of a foreign country but registered to conduct business in the U.S.
Not every business entity is subject to the CTA’s reporting requirements. FinCEN has identified 23 types of entities that are exempt from reporting requirements. The exemption list includes banks, governmental authorities, insurance companies, public utilities, some tax-exempt entities, and other types of businesses that are already highly regulated by the federal government.
Reporting Companies that do not qualify for an exemption will need to file a beneficial ownership information (BOI) report to FinCEN containing details about the reporting company itself and two categories of individuals – beneficial owners and company applicants. Reporting companies formed prior to January 1, 2024 need not report company applicant information.
Generally speaking, an individual who owns or controls at least 25% of a reporting company’s ownership interests or who directly or indirectly exercises substantial control over the reporting company, would be considered a beneficial owner and need to be reported.
Individuals who directly file or are primarily responsible for the filing of a document with a state or tribal jurisdiction that forms or registers a reporting company.
Due dates for Initial BOI reports vary based on when the reporting company was first formed or registered.
Once the Initial BOI report requirement is met, any previously reported information that changes must be corrected or updated with FinCEN within 30 days of that change. This also applies to reporting companies who become newly exempt.
Due dates for Initial BOI reports vary based on when the reporting company was first established in the U.S.
Non-compliance can result in significant penalties, including fines and imprisonment. It’s crucial for businesses to understand their obligations under the CTA and comply accordingly.
Civil Penalties: A business that willfully fails to report complete or updated beneficial ownership information as required by the CTA can face civil penalties of up to $591 per entity for each day the violation continues.
Criminal Penalties: In addition to civil fines, willful non-compliance with the CTA can result in criminal penalties. This includes fines of up to $10,000 and/or imprisonment for up to two years.
Additional Costs: Entities found in violation may also incur additional costs related to legal fees, administrative expenses, and potential damage to the business reputation.
A beneficial owner is any individual who owns or controls (directly or indirectly) at least 25% “ownership interest” in a reporting company; or an individual who directly or indirectly exercises “substantial control” over a reporting company.
Reporting Companies are required to disclose the identities of any individuals who own or control at least 25% of the ownership interests. Examples of ownership interests include:
An individual exercises substantial control over a reporting company if the individual meets any of four general criteria:
INITIAL REPORTS
Required to be filed by all companies that meet the definition of a reporting company and do not meet the requirements for a CTA Exemption.
CORRECTED REPORTS
Required to be filed when previously reported information is discovered to be inaccurate or incomplete.
UPDATED REPORTS
Required to be filed when there is a change to previously reported information about the reporting company or its beneficial owners.
INITIAL REPORTS
Due dates for initial reports vary based on when the reporting company was first formed or registered in the United States.
| U.S. Registration | Initial report Deadlines |
|---|---|
| Before 2024 | By December 31, 2024 |
| During 2024 | Within 90 days of registration |
| After 2024 | Within 30 days of registration |
CORRECTED REPORTS
If any information provided on a report is found to be incorrect or incomplete, you must submit a corrected report within 30 days of discovering the error or omission.
UPDATED REPORTS
Similarly, any change in beneficial ownership information previously reported will require an updated report to be filed within 30 days of the discovery of that change.
REPORTING COMPANY
COMPANY APPLICANT
BENEFICIAL OWNERS
FinCEN identifiers are unique identifying numbers that FinCEN will issue to an individual or a reporting company upon request provided the individual or company applicant provides the required personal and identification details. Once an individual or a reporting company has been issued a FinCEN Identifier, that number can be provided in lieu of the personal details on BOI reports.
With Platinum Filings’ BOI Manager Platform, submitting bulk BOI Filings to FinCEN is seamless. The platform allows users to track the progress of their filings and access evidence of submissions, ensuring transparency and accountability throughout the process. It tracks all changes to records in the system, ensuring that no data goes missing.
The Platform enables reporting companies to be organized by project or billing group enhancing usability. Secure storage of all information for subsequent filings is a cornerstone of the BOI Manager, ensuring data integrity and compliance.
Users receive alerts for filings and any changes that trigger updated reporting requirements. The platform’s extensive reporting functionality, including email subscriptions for reports with extensive filtering logic, ensures that users stay informed and compliant.
An invaluable feature for auditing and compliance purposes, the platform’s audit log tracks all actions and changes to the records within the system. This ensures that every modification is recorded and traceable, providing a compressive audit trail. This platform is transforming compliance management, offering an unprecedented level of efficiency and security in managing BOI data.
Find answers to commonly asked questions about the Corporate Transparency Act.
The Corporate Transparency Act (CTA) is a major advancement in U.S. business regulation aimed at enhancing transparency and fighting illegal activities such as money laundering, fraud, and the financing of terrorism. This act mandates certain legal entities to provide information about their beneficial owners.
The Corporate Transparency Act (CTA) applies to the majority of corporations, limited liability companies (LLCs), and similar entities established or registered to conduct business in the United States. These entities must disclose beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).
Determine Applicability: First, determine if your company is subject to the CTA or if it qualifies for one of the available exemptions.
Identify Beneficial Owners: Beneficial owners are individuals who own or control at least 25% of the company or who exercise significant control over the company.
Collect Required Information: For each beneficial owner, gather the following information:
File Report with FinCEN: Submit the information to FinCEN using their reporting system, or a third-party filing service such as Platinum Filings.
Keep Information Updated: Update FinCEN of any changes in beneficial ownership or the information reported within 30 days.
Maintain Records: Keep records of the reported information and any supporting documents.
Beneficial Ownership Information refers to the details about the individuals who ultimately own, control, or benefit from a company or other legal entity. This information includes the names, addresses, and other identifying details of these individuals. It helps authorities and stakeholders understand who is behind a business, ensuring transparency and preventing illegal activities like money laundering, tax evasion, and corruption.
A Beneficial Ownership Information Report can be submitted online through FinCEN’s secure BOI E-Filing System. If you need to manage many entities and/or beneficial owners, the BOI Manager at Platinum Filings allows users to easily manage their entities simplifying the collection and updating of beneficial owner data.
Experience the power of the Platinum Filings BOI Manager today!
