Navigating the Corporate Transparency Act: A Practical First Look for Business Owners

10/20/2023 - By Marc-Antoine Meyer de Stadelhofen

Are you a business owner based in the US? Is your business organized with a Secretary of State? If so, the filing requirements under the Corporate Transparency Act (CTA) may affect your business. This blog is written to provide a better understanding of your obligations under the Act and answer questions you may have.

What is the Corporate Transparency Act?

The CTA, passed in 2020, mandates certain disclosures from Reporting Entities.

What are Reporting Entities?

Reporting Entities are domestic or foreign corporations, limited liability companies, or any other entities formed by filing documents with a secretary of state or similar office. These disclosures will be made through a Beneficial Ownership Information (BOI) Form.

Who is exempt from filing?

It's important to note that there are 23 entities exempted from filing the BOI form. These include tax-exempt organizations, entities registered with the Securities and Exchange Commission (SEC), accounting firms registered with the Public Company Accounting Oversight Board (PCAOB), credit unions, bank holding companies, insurance companies, public utilities, and others. Businesses domiciled in the US with over 20 employees and gross receipts exceeding $5 million are also excluded.

If I am exempt from filing the BOI form, am I done?

No, these excluded entities must submit a written certification to FinCEN disclosing their exemption status along with the applicant's information.

Understanding the BOI Form and its Purpose

The BOI form serves as a means to disclose the direct and indirect owners of a Reporting Entity who hold 25% or more ownership. Additionally, the form will include information about the applicant. The Financial Crimes Enforcement Network (FinCEN) Acting Director Himamauli Das stated: “The [BOI] reporting rule finalized earlier this year is a major step forward in unmasking shell companies and protecting the U.S. financial system from abuse by money launderers, drug traffickers, sanctioned oligarchs, and other criminals”.(1) The BOI form can be viewed here.

Key Dates and Filing Deadlines

The effective date for BOI form filing is January 1, 2024. Entities established before January 1, 2024 have until December 31, 2024, to file their original submission. For entities created after January 1, 2024, the deadline for submitting the original filing is within 30 days of inception. Any subsequent changes to Original Filings must be reported within 30 days as well and this includes changes in ownership, address, name, etc.

Penalties for Non-Compliance

The penalties for non-compliance with the BOI filing requirements are substantial and should be carefully considered. Violators may have to pay $500 for each day that the violation continues or is not fixed. Additionally, they could face criminal charges with a maximum penalty of $10,000, up to two years in prison, or both. However, there is a Safe Harbor for persons acting in good faith to correct inaccurate information submitted within 90 days of the inaccurate report.

Stay Informed:

While the draft BOI form has not yet been released in the Federal Register for public comment, FinCEN assures that it will be made available well in advance of the effective date. Keep an eye out for further updates and announcements from FinCEN to ensure compliance with the Act. Feel free to contact our professionals at Saltmarsh with your questions.

About the Author | Marc-Antoine Meyer de Stadelhofen

Marc is a staff accountant in the Tax & Accounting Services practice of Saltmarsh, Cleaveland & Gund. He works with a wide range of industries, including construction, manufacturing and high net worth individuals. He began his tax career in 2020 as a tax advisor, specializing in international individual tax returns with French-speaking countries.