Corporate Transparency Act

The Corporate Transparency Act (“CTA”) is a new regulation created by the Financial Crimes Enforcement Network to help increase transparency in business ownership, and decrease illicit activities by businesses operating in the US.

It may seem like another thing on your already full to-do list as a small business owner, but
the goal of it is to decrease financial crimes. See more at the end ofthis article of the benefits this regulation is wanting to achieve. But let’s get right to it, as you’re busy!

What you need to know:

1) If you started your business before December 31, 2023, you have until 12/31/2024 to file.
2) If you started your business after January 1, 2024, you need to file within 90 days of formation (“actual or public notice that itscreation or registration is effective”).
3) If a reporting company is created after January 1, 2025, it must file its initial BOIR within 30 days after receiving actual orpublic notice that its creation or registration is effective.

As specified in the CorporateTransparency Act, a person who willfully violates the BOI reporting
requirements may be subject to civil penalties of up to $500 for each day that the violation continues. A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000.

How to file

Online Submission: Entities can file their BOI reports electronicallythrough the FinCEN reporting system. https://boiefiling.fincen.gov/
Updates and Corrections: If there are changes to the beneficial ownershipinformation, entities must update their filings within 30 days of the change.

What is needed

Entity Information:

• Full legal name
• Any trade or DBA name
• Complete current U.S. address
• State, Tribal, or foreign jurisdiction offormation
• IRS Taxpayer Identification Number (TIN) -including an Employer Identification Number (EIN)

Beneficial Owner Information:

• Full legal name,
• date of birth,
• complete current address,
• and a unique identifying number (e.g., passport number, driver’s license number) for each beneficial owner. * You will also need to submit an image of the document containing the unique identifying number.
  *Who is a beneficial owner?
  A beneficial owner is any individual who, directly or indirectly:
  · Exercises substantial control over a reporting company;
  OR
  · Owns or controls at least 25 percent of the ownership interests of a reporting company.

Company Applicant Information (if applicable as not all reporting companies are required to report this):

• Full legal name,
• date of birth,
• address, and
• a unique identifying number for each individual who files the document to create or register the entity.

Who needs to file

Broadly defined, business that need to file, or “reporting companies” include:

• Corporations, LLCs, S-corps,LLCs, and similar business formations created or registered to do business in the U.S.
• Sole proprietorships, general partnerships, and certain trusts may fall outside the scope of the CTA if no state filing is required for their formation.
• Foreign Entities registered to do business in the U.S.
• Exemptions: Certain entities, such as large operating companies,regulated entities, and inactive entities, may be exempt from filing.

Additional Resources:

• FinCEN’s website has instructions and resources to helpbusinesses comply with the CTA. https://boiefiling.fincen.gov/help
• The Beneficial Ownership InformationSmall Entity Compliance Guide: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf
  The guide goes into detail on many ofthe filing features, such as exempt companies, and examples.

Not sure if you should file? Better to be safe than sorry to avoid a potentially large fine. So, make yourself a cup of coffee, and justget to it! If you have all the information ready, filing can take under a half hour.

Want more details on what this regulation is hoping to achieve?

Benefits to US citizens & Federal Government:

Enhanced Transparency:
By requiring entities todisclose their beneficial owners, the government gains a clearer picture of who actually owns and controls companies. This transparency helps in identifying and preventing illicit activities such as money laundering, terrorist financing, and other financial crimes.

Improved Law Enforcement:
With access to beneficial ownership information, law enforcement agencies can more effectively
investigate and prosecute criminal activities. This information is crucial for tracking down individuals who use complex corporate structures to hide their identities and engage in illegal activities.

Financial Integrity:
The regulation helps maintain the integrity of the financial system by ensuring that businesses operate transparently and ethically. This reduces the risk of financial institutions being used for illegal purposes.

Tax Compliance:
While the primary focus of the regulation is on combating financial crimes, it also indirectly supports
tax compliance. By making it harder for individuals to hide their ownership of entities, the regulation helps prevent tax evasion and ensures that businesses pay their fair share of taxes.
Impact on fraudulent businesses

Reduction in Fraud: The regulation makes it more difficult for fraudulentbusinesses to operate undetected. By requiring detailed ownership information, it becomes harder for individuals to set up shell companies or other entities for fraudulent purposes.

Increased Accountability: With greater transparency, businesses are held accountable for their actions, reducing the likelihood of fraudulent activities.

Overall, the regulation aims to strengthen the financial system, support law enforcement efforts, and
promote fair business practices; which can ultimately lead to better tax compliance and reduced losses from fraudulent activities.

Investment advisory services offered through Equita Financial Network, Inc. an investment adviser with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Equita Financial Network also markets investment advisory services under the name, Astraea Wealth Management LLC.
Portions of this blog were generated using artificialintelligence but audited and edited by a living, breathing, human who is also a financial advisor.
References used: https://boiefiling.fincen.gov/resources/BOIR_Filing_Instructions.pdf and https://www.fincen.gov/boi-faqs 
This document is not legal, financial or tax advice. For individual advice, talk to your advisors.