In December of 2021, Congress passed the Corporate Transparency Act, which is set to be enacted on January 1, 2024.
The Corporate Transparency Act (“CTA”) is a component of the Anti-Money Laundering Act of 2020 enacted to enhance transparency in entity structures and to prevent money laundering, tax fraud and other financial crimes.
Congress has allotted 23 exemptions that include any company that employs more than 20 full time employees (as defined in 26 CFR 54.4980H-1(a) and 54.4980H-3) and any company that reported more than $5 million in gross receipts or sales in the previous year. The following image outlines the allotted exemptions:
As of Jan 1, 2024, eligible business organizations are required to submit a beneficial ownership information report (“BOI report”) and company applicant information to the U.S. Treasury’s Financial Crimes Enforcement Network (“FinCEN”).
Eligible business organizations consist of both domestic and foreign privately held companies who are registered to do business in the U.S. Beneficial ownership information is identifying information about the individuals who exercise substantial control over a business or own or control at least 25% of the interest in a business. A company applicant is an individual who directs or controls the filing action. The required identifying information includes name, date of birth, residential address, and ID number, as well as the business organization’s name, address, jurisdiction of formation and tax ID number.
For reporting companies formed before January 1, 2024, you will have until January 1, 2025, to file the required BOI report and are not required to submit company applicant information. For reporting companies formed on or after January 1, 2024, you will have ninety (90) days to file the initial BOI report and company applicant information with FinCEN. Companies formed on or after Jan. 1, 2025, will have thirty (30) days to file the initial BOI report and company applicant information with FinCEN. After the initial BOI report is filed, a BOI report is only needed when there is updated or corrected information. There is no annual reporting requirement. Failing to file a BOI report or intentionally filing false information may lead to criminal and civil penalties.
While the CTA and BOI report may seem intimidating, we at Upton & Hatfield, LLP have made sure to thoroughly investigate the CTA requirements and are fully equipped to handle any questions or concerns you may have.
For any further information, please contact our office.