New Law for Business Owners: The Corporate Transparency Act
In case you missed it, there’s a new law in town - and you may need to comply with it!
If you have a Limited Liability Company (LLC) or a Corporation in the United States, you likely have to comply with the Corporate Transparency Act, which just went into effect on January 1st, 2024.
There’s been a lot of chatter about it online, a lot of fear because of the high penalties, and a whole lot of confusion. So let’s clear it all up with a breakdown of what you need to know.
Do not panic! I’m here to help!
What is it: The Corporate Transparency Act was enacted in 2021 as an effort to make it more difficult for people to use businesses to do things like commit tax fraud, money laundering & other illicit activities.
How does it plan to do that: Right now, some individuals use business structures (like LLCs) to hide or benefit from illegal activity because not all states require the same amount of information provided on the owners of these companies when forming them. By requiring this report, personal information will now be gathered on people who own or have control over these companies.
What do you need to do?
File a report: Beginning 1/1/24, many companies will now be required to complete a Beneficial Ownership Information (BOI) Report. This report provides information on the owners or controllers of a company to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of Treasury.
Who has to file: "Reporting companies" are required to file. "Reporting companies" are:
A corporation, a limited liability company (LLC), or other company created in the U.S. by filing a document with a Secretary of State or similar office under the law of a state or Indian tribe (aka also applies to PLLC's, P.C.'s, etc); OR
A foreign company registered to do business in any U.S. state or Indian tribe by a filing.
There are also 23 exemptions. Some businesses that may qualify for an exemption are banks, credit unions, insurance companies, inactive entities, tax-exempt entities, & gov't authorities. But even if you fit into one of those categories, there are still other circumstances that you must fall into in order to qualify for an exemption. Learn more here.
When to file, where to file & how much does it cost to file this BOI Report?!
When to file: this depends on when you formed your business entity:
BEFORE 1/1/24: you must comply by the end of 2024.
During 2024: you have 90 days after forming to comply.
After 2024: you will have 30 days after forming to comply.
Updates or corrections: if there are any changes about your company or beneficial owners after filing a BOI report, an updated report is due within 30 days.
Updates can include a new DBA, a new CEO, a sale, a change to a beneficial owner's address, etc.
Inaccuracies in reporting should also be corrected within 30 days.
Where to file: online through FinCEN's website: www.fincen.gov/boi
Cost: it is FREE to file this report online. (Surprising, right? Since when doesn’t the government charge for something! Just kidding, you can also get your EIN for free from the IRS). You do not need to pay for LegalZoom or some other company to do it if you do not want to.
What information do you need?
Beneficial Owners: identify who is a "beneficial owner" aka any individual who, directly or indirectly:
exercises substantial control over a reporting company OR
owns or controls at least 25% of the ownership interests of a reporting company.
Remember from above, LLCs and corporations are "reporting companies.” If you are a single-member LLC (meaning you are the only owner), then you would be the "beneficial owner." If you have more questions about this, see more info here.
Company Applicants: a reporting company (LLC or corporation) is required to report "company applicants" IF the reporting company was created on or after 1/1/24, or if it is a foreign reporting company and registered to do business in the U.S. on or after 1/1/24.
If you created your LLC or corp BEFORE 1/1/24, you do not have to worry about this!
If you created your LLC or corp AFTER 1/1/24, or are a foreign reporting company registered in the U.S. AFTER 1/1/24, see more info here on Company Applicants.
Information about the Reporting Company: you will have to report:
the full legal name of the company
any DBA names ("doing business as", trade names, assumed business names, fictitious names, etc)
address of the principal place of business in the U.S. (not a PO Box)
State you formed your business entity in
EIN (from the IRS) or SSN
Information about the Beneficial Owner(s): you will have to report:
the full legal name
date of birth
current residential address
unique identifying number & issuing jurisdiction from 1 of the following non-expired documents:
U.S. passport
State driver's license
Identification document issued by a state, local gov't, or tribe
image of the above document
See? It really doesn’t seem THAT scary, now does it? How long it takes will simply depend on how many beneficial owners you have and if you have to report information on any company applicants. Don’t fall for the scams out there pressuring you to hire someone to complete this for you, or that you’re going to be fined or jailed if you don’t complete it right now.
Yes, there will be penalties for non-compliance, but they have not started yet. Penalties can be $500 per day for every day you don’t report past the due date, up to $10,000, and two years in prison. However, please remember your due date depends on when you formed your entity. So if you formed PRIOR to 1/1/2024, your due date is 12/31/2024. If you form an entity at any point during 2024, you will have 90 days to comply, and if you form after 2024, you will have 30 days to comply.
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