There’s a new federal law called the Corporate Transparency Act (CTA) that requires small businesses across the country to file reports disclosing their ownership structure and leadership. Failure to comply could result in major fines or even jail time for business owners.
Here’s what you need to know.
What is the Corporate Transparency Act?
The Corporate Transparency Act was passed by Congress in 2021 as part of the National Defense Authorization Act. It went into effect on January 1, 2024. The goal is to combat financial crimes like money laundering, tax evasion, and terrorism financing.
The law requires nearly all business entities in the U.S. to file a report with the Financial Crimes Enforcement Network (FinCEN) disclosing the identity of all “beneficial owners” and some key executives. This applies to corporations, LLCs, partnerships, and in some cases, even sole proprietorships.
If your existing business was already registered before 2024, you have until the end of 2024 to file your BOI report. However, any new entities formed in 2024 or later must file within 90 days of formation.
Which Businesses Need to Comply with BOI Reporting?
If you had to file formal registration documents with your Secretary of State or other state agency to form your business, you must comply with BOI reporting. This includes:
- C-corps and S-corps
- All LLCs (even single-member)
- Partnerships
- Some sole proprietorships (if registered with the state)
Basically, if you have a formal business entity or registered sole proprietorship, you need to file a BOI report.
The only exempt organizations are some non-profits, along with banks and financial institutions that already report ownership information to regulators.
What’s a “Beneficial Owner?”
This is the tricky part that many business owners are confused by. A “beneficial owner” includes:
Anyone who (1) owns or controls at least 25% of the reporting company’s ownership interests, or (2) exercises substantial control over the reporting company (regardless of whether they own ownership interest in the company. This includes executives, board members, and other parties with major decision-making authority over finances, operations, policies, etc. Beneficial Owner is broadly defined to even include anyone who is considered an important decision-maker for the reporting company.
As you can see, the definition goes far beyond just including individual owners or shareholders. It encompasses a wide range of people who ultimately control or benefit from the entity.
What Happens If You Don’t File Your BOI Report?
The penalties for not filing your BOI report are quite severe. They include:
- Civil fines up to $500 PER DAY
- Criminal fines up to $10,000
- Up to 2 years in federal prison
In addition to harsh fines and possible jail time, not filing puts your business at risk in other ways. For example, banks may refuse to work with entities that haven’t properly registered. You may also have trouble securing loans, business licenses, government contracts, etc. if you are non-compliant.
Should You File Your BOI Report Yourself?
While you technically can file your BOI report directly through the FinCEN portal yourself, we don’t recommend it for most business owners. The law is quite complex with many nuances. Without proper legal guidance, it can be extremely difficult to accurately identify all beneficial owners and produce a 100% compliant report.
Even experienced attorneys are finding this law challenging to parse through. As a business lawyer with many years of experience, I highly suggest letting a professional handle your BOI filing. It will save you an incredible amount of time and provide peace of mind that you’ve covered all bases.
Most importantly, having an attorney file on your behalf helps mitigate the risk of unintentional errors. It’s better to be safe than sorry when it comes to CTA compliance.
Don’t Wait to File Your BOI Report – Take Action Now
With the deadline approaching at the end of 2024, it’s important not to delay your BOI reporting. We anticipate a massive rush of business owners scrambling to file reports in the final months. Government websites may crash under the heavy demand. Attorneys will be overloaded helping clients at the last minute. None of these will be excuses that will save your business from the penalties waiting on the other end if your BOI report is not filed timely.
Avoid stress, headaches, and risks by taking action early. Learn exactly what the law requires for your unique situation. Get your beneficial owners properly identified. And submit your complete, accurate report as soon as possible.
Free BOI Explainer Call
If you have questions about CTA or BOI requirements for your small business, click here to schedule a FREE call with my team. We know filing government reports can be difficult and a real pain.
That’s why, if you are a Florida-based business, we have put the systems in place to do it for you with as little effort on your part as possible.
All you have to do is schedule your Free BOI Explainer Call with my team.
