Beneficial Ownership Informational Reporting: What the Corporate Transparency Act Means for Your Business in 2024

Starting January 1, 2024, many U.S. companies will be required to report detailed information about their “beneficial owners”—those individuals who own or control the company. This reporting is mandated by the Corporate Transparency Act (CTA) and will be managed through the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury Department. The CTA aims to combat illicit activities such as money laundering and tax evasion by increasing transparency regarding who truly owns or controls a business.

This law impacts a wide range of companies, but not all are required to comply. Therefore, it’s crucial to determine whether your organization needs to file and understand what steps to take if you do.

What is the Corporate Transparency Act (CTA)?

The Corporate Transparency Act is a law that was passed in 2020 to establish new rules around beneficial ownership reporting in the U.S. The primary goal of the CTA is to prevent criminal actors from hiding behind anonymous corporate structures. The law requires companies to disclose information about individuals who significantly influence or control the company, known as “beneficial owners.”

Who Qualifies as a Beneficial Owner?

A beneficial owner is generally any individual who:

• Directly or indirectly owns at least 25% of the company.
• Exercises significant control over the company’s operations or management.

However, there are some nuances to this definition. It’s advisable to consult with a legal expert to clarify your company’s specific situation. Beneficial ownership can be complex, and businesses should carefully review ownership structures to determine reporting obligations.

What Information Will Be Reported to FinCEN?

Companies required to report will need to provide detailed information about their beneficial owners, including:

• Full legal name.
• Date of birth.
• Current residential or business address.
• A unique identifying number from a government-issued ID (such as a passport or driver’s license).

This information must be submitted to FinCEN using their online system.

Filing Exemptions – Does Your Business Qualify?

Not all companies are required to file under the CTA. Certain organizations, like large operating companies with more than 20 employees and over $5 million in revenue, or highly regulated entities like banks, may qualify for an exemption.

To determine if your organization is exempt from reporting, it’s essential to review the detailed criteria provided by FinCEN or consult a legal expert.

Important Deadlines and Filing Penalties

If your business is subject to the CTA’s reporting requirements, the deadline for initial filings is January 1, 2025. Meeting this deadline is critical, as failure to file or provide false information can lead to significant consequences.

Penalties for Non-Compliance:

• Fines: Up to $591 per day for late or missing reports.
• Criminal Penalties: Up to $10,000 in fines and/or up to two years in prison for willful non-compliance.

To avoid these penalties, starting the process well before the deadline is recommended. For companies that need assistance, Maner Costerisan is available to help with filing and determining your company’s reporting obligations.

Frequently Asked Questions

What is a “beneficial owner”?

A beneficial owner is anyone who:

• Directly or indirectly owns 25% or more of a company.
• Exercises substantial control over the company’s operations. This includes senior officers or those who influence key decisions, even if they have no ownership stake.

What companies are subject to the CTA’s reporting requirements?

The CTA applies to most corporations, LLCs, and other entities formed by a filing with a state or federal agency. Exceptions include large operating companies (with 20+ U.S.-based employees and $5M in annual revenue) and certain regulated entities that already disclose their ownership information.

When must businesses file beneficial ownership information?

• New entities (created in 2024 or later) must file within 30 days of formation.
• Existing entities (formed before January 1, 2024) must file by January 1, 2025.
• Changes in ownership or corrections must be reported within 30 days.

What information must be reported under the CTA?

Businesses must report:

• The company’s full name, DBA name (if applicable), business address, formation state, and Taxpayer Identification Number (TIN).
• For beneficial owners and applicants: Name, birthdate, address, and a unique identifier (e.g., driver’s license or passport), along with a copy of the identification document.

How can businesses file their beneficial ownership information?

Businesses must submit their beneficial ownership information online through the FinCEN system. For more details, visit FinCEN.gov.

Are there any exemptions to the reporting requirements?

Yes, certain entities are exempt, such as:

• Large operating companies with 20+ employees, $5M+ in annual revenue, and a physical U.S. office.
• Entities already regulated by the government, like banks and insurance companies.

How can I determine if my business is exempt?

Consult with a legal expert or tax professional to review your entity’s qualifications for a possible exemption from CTA reporting requirements.

For more information, visit FinCEN’s FAQ on Beneficial Ownership Reporting: FinCEN BOI FAQ, or contact us at maner@manercpa.com.