The Corporate Transparency Act: Everything Security Industry Leaders Need to Know

Small business owners need to know about the Corporate Transparency Act, as non-compliance can result in severe civil and criminal penalties.

The Corporate Transparency Act: Everything Security Industry Leaders Need to Know

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The Corporate Transparency Act, a new reporting requirement that went into effect on Jan. 1, requires millions of small businesses to file a Beneficial Ownership Information (BOI) Report with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).

Every small business owner needs to know about this new reporting requirement, as non-compliance can result in severe civil and criminal penalties. This article addresses some of the main questions small business owners have been asking about BOI reporting.

Purpose of the Corporate Transparency Act

The Corporate Transparency Act (CTA) is mainly an anti-money-laundering law with the intent of preventing criminals from concealing their ownership of corporations, LLCs or similar entities in the United States to facilitate money laundering, financing of terrorism, tax fraud and other illegal acts.

Congress believes that federal legislation providing for the collection of beneficial ownership information is needed to protect national interests and better enable efforts to counter those illegal acts.

Who Has to File a BOI Report?

Every corporation, LLC or other entity created by the filing of a document with a Secretary of State or similar office under the law of a state or Native American tribe is required to file a BOI report unless it qualifies for an exemption.

Those entities created in the United States and not exempt — and therefore required to file a BOI report — are called “domestic reporting companies.”

What a Company Has to File to Comply

Under the Corporate Transparency Act, each company has to file certain information about the business. All beneficial owners will have to report certain identifying information, including date of birth, home address, passport, driver’s license and other sensitive information.

The information can be disclosed to a limited group of requestors, including federal agencies engaged in national security, intelligence and law enforcement; state law enforcement agencies with a court order; the Treasury Department; financial institutions, with the company’s consent; government regulators of financial institutions; and certain foreign authorities requesting information through a U.S. agency.

When and How to File Under Corporate Transparency Act

The initial report and all updates and corrections must be filed electronically with FinCEN, via FinCEN’s website, by Jan. 1, 2025. If the entity is formed during the calendar year 2024, it has 90 days to file.

If the entity is formed on or after Jan. 1, 2025, it must file within 30 days of formation. If there is any change in the information reported about the reporting company or its beneficial owners, the reporting company must file an updated report within 30 calendar days after the date of the change.

Keep in mind that you will not be able to see previously reported information on the FinCEN website, so be sure to keep records of what you have filed.

It is estimated that it will take most companies two-and-a-half to three hours to supply the information and upload the forms if they get it right the first time. Companies that make mistakes will find their applications rejected and will have to resubmit their information within 30 days.

Can Another Firm File for Me?

Just as they do with any other government requirement, firms will spring up that will offer to file the information for you. Remember that these firms may or may not have the necessary skills. And don’t forget that you are still responsible for the information filed.

Not only can we assist you in filing but we also have a secure portal that you can access so you can easily understand the requirements, as well as upload the scanned documents, monitor your progress, submit your filing to FinCEN and see previously filed documents so that you can correct errors and make changes.

Using our portal will take 15 to 20 minutes. Feel free to reach out to us at [email protected].

Mitch Reitman is principal at Reitman Consulting Group, Inc.

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