The Corporate Transparency Act is a new federal law that went into effect at the start of 2024. Due to the requirements placed on small businesses, it should be on the radar of every business owner. The law requires businesses to file information about individuals with ownership in the company with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) bureau by the end of the year. Failure to file the required report may result in significant penalties, including fines of up to $500 per day and/or jail time.
The following overview will provide you with the important points associated with this new law. At PassioHR, we’re always monitoring the latest changes to laws impacting businesses, and we can help you navigate the requirements of the Corporate Transparency Act to ensure you remain compliant.
The Corporate Transparency Act was passed to help the government fight a variety of illicit business activities, including:
The goal of this law is to make it harder for people committing these crimes from hiding ownership stake or benefitting from their ownership of U.S.-based businesses. To that end, businesses who meet the specified criteria are required to file a Beneficial Ownership Information (BOI) Report to the FinCEN, ensuring that ownership details of a broad range of businesses are accessible to the government.
The Corporate Transparency Act defines a beneficial owner as an individual with a significant share in corporate ownership, either directly or indirectly. You are considered a beneficial owner if you meet the following criteria:
LLCs, corporations and other business entities which filed business formation documents with a Secretary of State or similar government agency must file a BOI report unless they fit into one of the 23 exempt categories. Foreign companies that are registered to do business in the U.S. must also file a BOI.
FinCEN’s Small Entity Compliance Guide provides a checklist to help you determine whether your business qualifies for an exemption. This guide is available on www.fincen.gov/boi. Keep in mind that only a small percentage of businesses will qualify as exempt. In most instances, you will need to file a BOI report.
Companies should include their full legal name, any trademark or DBA names, the location of their primary place of operation, jurisdiction of formation, and the Taxpayer ID number in their BOI report.
Beneficial owners need to provide their full legal name; birth date; current residential address; a unique identifying number and issuing jurisdiction from a valid driver’s license, U.S. passport or state ID document; and a suitable image of the ID document.
Foreign companies required to file a BOI report must also provide the address information for their business location in the United States.
Companies should report changes concerning any beneficial owners or any changes making the company eligible for an exemption within 30 calendar days.
Filing a BOI report may be done online at the official FinCEN website. It is vital to be cautious of scams and privacy breaches during this process, ensuring you only interact with official channels. Only file your report with the official FinCEN government website. If you encounter any dubious emails, mail, or phone calls about the Corporate Transparency Act reporting requirements, do not act on these requests.
As a full-service PEO company, PassioHR can assist you with any legal compliance matters involving your business. Our team is constantly monitoring changes to employment laws, as well as any other updated regulations impacting businesses. When you work with our team, you’ll benefit from this expertise and have peace of mind that all compliance matters are addressed properly. These important services will help you avoid costly penalties that can have a devastating impact on your business.
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