What is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) is a new law that went into effect on January 1, 2024, requiring small and medium-sized businesses to file Beneficial Ownership Information (BOI) to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
What is Beneficial Ownership Information?
BOI refers to the identifying details about individuals who directly or indirectly own or control a company. “This information includes the names, dates of birth, addresses, unique identification numbers and government-issued IDs of each owner of more than 25% interest in a company and everyone who has substantial control over the business,” according to this article written by a New England attorney. Reporting requirements may vary in cases of exempt entity ownership, minor child ownership, foreign pooled investment vehicles and for company applicants before 2024.
Why was this legislation passed?
The Corporate Transparency Act is a response to rising concerns about financial crimes and fraud, a growing threat to our industry and many others. Some of the goals of this legislation are to enhance transparency around ownership and control of corporate entities, to assist FinCEN in tracking financial crimes and safeguarding the integrity of the U.S. financial system and to help identify businesses that have been used to conduct illegal financial activities. Businesses that don’t comply with the CTA or file properly could face consequences, including prison time and hefty fines.
Who needs to file a Beneficial Ownership Report?
“Most of the approximately 33 million small businesses in the United States will be required to file with FinCEN,” according to this same article from the New England Biz Law Update. Whether your business is just forming or has been up and running for years, it will likely qualify as a reporting company–domestic or foreign– that must submit identifying information about its owners. However, some large businesses, nonprofits and public companies, including banks, credit unions, insurance companies, accounting firms, government groups and more, are exempt and do not need to file a report.
When does the BOI report need to be filed?
The BOI filing dates are as follows, according to this article by Wolters Kluwer:
- A domestic reporting company created on or before December, 31, 2023, must file its initial BOI report by January 1, 2025.
- A domestic reporting company created on or after January 1, 2024, and before January 1, 2025, must file a report within 90 calendar days of receiving actual or public notice that its creation has become effective.
- A domestic reporting company created on or after January 1, 2025, must file a report within 30 days of the date on which it receives actual or public notice that its creation has become effective.
- If the information about the reporting company or its beneficial owners changes, the reporting company must file an updated report within 30 days after the change occurs.
- If a report was inaccurate when filed, a corrected report must be filed within 30 days after the reporting company becomes aware of or has reason to know of the inaccuracy.
At Calloway Title, our goal is to ensure that our clients and their commercial real estate transactions are safe and secure from illegal activity, and this new legislation will help us achieve that goal. Understanding your BOI filing requirements and deadlines under the CTA is extremely important, and we’re here to support you in every way we can. Visit www.titlelaw.com to work with us!
