Last Updated on February 27, 2024
This quick guide will explain the steps to file Beneficial Ownership Information (BOI) under the Corporate Transparency Act (CTA).
The U.S. has many companies, but only a few states make them reveal who owns and controls them. This lack of transparency is a problem because it lets people, like criminals and corrupt officials, hide and use fake companies for illegal money.
In 2021, the U.S. Congress passed the Corporate Transparency Act to fix this. This law makes most U.S. companies share their Beneficial Ownership Information (BOI) with FinCEN, part of the Department of Treasury. FinCEN keeps this info safe and only shares it when needed for criminal investigations or bank checks.
What is Beneficial Ownership Information?
Beneficial owners are people who meet certain criteria: they either own 25 percent or more of a company, either directly or indirectly, or they have significant control over the company, whether directly or indirectly.
Being a beneficial owner isn’t just about owning shares; it includes people with important roles in the company, even if they don’t own shares. Each beneficial owner must provide their name, address, date of birth, and a government ID.
What is a Reporting Company?
A reporting company under the Corporate Transparency Act is a business entity that must provide information about its beneficial owners to comply with the law.
This includes companies formed in the U.S. and foreign companies operating in the U.S. However, some types of businesses, like publicly traded companies, are exempt from these reporting requirements.
Why Report Beneficial Ownership Information?
The CTA, passed by Congress in 2021, mandates reporting beneficial ownership information to FinCEN under the U.S. Department of the Treasury.
This legislation is committed to enhancing transparency and preventing the misuse of shell companies or obscure ownership structures for illicit purposes.
Failure to report complete or updated BOI to FinCEN can result in fines of up to $10,000, imprisonment for up to two years, or both.
Who Must Report?
The Corporate Transparency Act requires most businesses to report Beneficial Ownership Information (BOI). This rule applies to companies formed in the U.S. and foreign companies operating within the U.S.
Some corporations, like publicly traded companies, don’t have to report BOI. It would be best to diligently examine the criteria, as 23 specific entity types qualify for exemptions from the reporting requirements.
If you’re unsure whether your business qualifies for exemptions under the Corporate Transparency Act, TurboCTA offers an Exemption Checker tool. This tool simplifies the process by quickly assessing whether your company meets any of the exemptions outlined in the law. It’s a convenient way to ensure compliance and navigate the reporting requirements effectively.
How to File a BOI Report under the Corporate Transparency Act
When to Report BOI to FinCEN?
Beneficial ownership information reporting to FinCEN begins on January 1, 2024. Until then, FinCEN won’t accept any BOI reports. You can prepare for filing by creating an account with FincenFetch (for law and accounting firms) or TurboCTA (for reporting companies).
Corporate Transparency Act Reporting Deadlines
- Pre-2024 companies must file their initial BOI report by January 1, 2025.
- Post-2024 companies have 30 days from their effective creation or registration date to file their initial BOI report.
How to File BOI Report Under the Corporate Transparency Act
Reporting your company’s beneficial ownership information can be conducted electronically through FincenFetch (for law or accounting firms) or TurboCTA (for reporting companies).
- Understand CTA Requirements: Familiarize yourself with the Corporate Transparency Act’s requirements and provisions to determine your business’s status or any applicable exemptions.
- Gather Necessary Information: Gather all required information about your business and its beneficial owners, including names, addresses, and other vital details.
- Create a FincenFetch or TurboCTA Account:
- Create an account with TurboCTA if you’re a reporting company and wish to file yourself.
- For accounting or law firms, register an account on the FincenFetch platform. This account allows you to generate a unique Fetch link for your clients, enabling them to easily follow the step-by-step directions for completing their filings.
- Complete the Form: Using TurboCTA or FincenFetch, follow the step-by-step directions provided within the platform. Supply accurate and up-to-date information about your business and its beneficial owners.
- Review and Verify Information: Double-check all provided information to ensure accuracy and completeness. Errors or omissions can lead to delays or compliance issues, potentially resulting in penalties and jail time.
- Submit the Filing: When ready, submit the CTA filing through TurboCTA or FincenFetch and be prepared to pay any associated filing fees.
- Maintain Records: Keep copies of all filings and related documentation for your records. These records are crucial for future reference and audits.
- Compliance Monitoring for Updated Report: Monitor your business to ensure ongoing compliance with the Corporate Transparency Act. Update your information promptly with FincenFetch or TurboCTA as necessary, especially if there are changes in beneficial ownership or their information.
Seek Legal Guidance
Considering the pressing nature and potential legal consequences of complying with the CTA, seeking guidance from legal professionals who leverage the FincenFetch platform is advisable. They can ensure comprehensive compliance and address any specific business-related concerns you may have. If you’re a reporting company looking for nearby firms using the FincenFetch platform, you can find them listed on FincenList.
U.S. businesses must understand and comply with the Corporate Transparency Act’s rules for reporting beneficial ownership is a critical matter for U.S. businesses. This law plays a significant role in improving transparency, preventing the abuse of corporate structures, and strengthening national security and law enforcement. To stay informed, regularly check corporatetransparencyact.org for compliance updates.