January 1, 2024
Did you know millions of U.S. small businesses must report ownership information to the federal government? The Corporate Transparency Act (CTA), which went into effect on January 1, 2024, may apply to you!
This new CTA law, passed by Congress and signed by the President, aims to fight financial crimes by increasing transparency around business ownership. Here at Carolina Business Services, we understand that this new regulation can seem complex. But don't worry! This guide will simplify essential facts about the Beneficial Ownership Information (BOI) Reporting.
We'll explain who qualifies as a Reporting Company and Beneficial Owner, walk you through the reporting process, and ensure you have the tools to comply with the CTA regulations. By following these steps, your business will be prepared to comply with this new legislation.
The CTA applies to most business structures commonly used by small businesses. This broad umbrella includes corporations, LLCs, and other similar business entities registered to operate in the U.S. For most companies, registering your entity, generally with the Secretary of State, automatically qualifies you as a Reporting Company. You must file an initial Beneficial Ownership Information (BOI) Report with the Financial Crimes Enforcement Network (FinCEN) by December 31, 2024.
Don't just think about owners. Instead, the question is, who owns, directly or indirectly, and who controls the business? This New Law cares about who ultimately calls the shots, not just who's on the ownership papers.
The CTA defines a Beneficial Owner broadly because the FinCEN goal is to know everyone involved in a business. The BOI Report acts as a spotlight on the actual owners and stakeholders (non-owners) with significant control over a company.
Demystifying the
FinCEN BOI Reporting
To help simplify this complex subject, let's take the fictitious Astor LLC as an example to understand who qualifies as a Beneficial Owner according to the Corporate Transparency Act (CTA).
Fictitious Astor LLC:
The Takeaway: When filing your BOI Report, consider direct and indirect ownership percentages and who controls the company's direction. Remembering these rules ensures you capture all the necessary information for FinCEN BOI Reporting.
Filing your BOI Report might seem complex, but we'll break it down into the critical pieces of information. Beneficial Owners are the core of the Report, identifying the individuals with control over your business, as defined by the Corporate Transparency Act (CTA). Gathering this information beforehand can streamline the BOI Report filing process.
Beneficial Owner Details
As discussed in our example for Astor LLC, there are two main ways someone can qualify as a Beneficial Owner:
For each Beneficial Owner, you'll need to include:
Company Information Details
Filing Type Clarifies Report's Purpose
Company Applicants
For New Businesses Formed After January 1, 2024:
This section identifies the individual(s) who officially formed your business with the Secretary of State or other authority. They could be:
The deadline for submitting your BOI Report depends on when you formed your business:
Thankfully, filing your BOI Report is straightforward. And there's no filing fee involved, making it a budget-friendly step towards compliance.
You can complete it online through FinCEN's secure portal: https://boiefiling.fincen.gov/fileboir.
Two filing options to suit your needs:
No matter which method you choose, remember to gather the necessary information we outlined earlier (beneficial owner details, company information, filing type, and company applicants for new businesses). Following these guidelines help ensure a smooth and efficient filing process.
While the BOI reporting process is straightforward, it's essential to take it seriously.
The Corporate Transparency Act (CTA) has sharp teeth for non-compliance.
Here's what you need to know:
Filing your BOI Report by the deadline helps you avoid these penalties and ensures your business operates compliantly. Remember, accurate and timely reporting is vital.
The Corporate Transparency Act (CTA) has changed the landscape of small business ownership. To help simply the process, here's a quick recap we have discussed:
The essential information you need to know as a small business owner:
Understanding these key points helps your business comply with CTA regulations. If you have further questions, consult a professional advisor or explore the FinCEN BOI resources linked throughout this guide.
A recent court ruling in Alabama on March 1, 2024, found the Corporate Transparency Act (CTA) to be unconstitutional because it exceeded Congress' authority under the Constitution (National Small Business United et al. v. Yellen et al.). However, this decision is currently being appealed by the Department of Treasury, meaning the CTA remains in effect for now. Because of this, businesses should still comply with the CTA's requirements until the court reaches a final decision on the appeal.
At Carolina Business Services, we understand the complexities of new regulations like BOI reporting. As your tax preparation partner, we're here to provide clarity and support. If you face BOI reporting challenges, remember we're just a call away. We are committed to helping you focus on what matters most—running your successful business.
Additional Resources Regarding the CTA’s New BOI Reporting Requirements for Small Businesses:
FinCEN website: https://www.fincen.gov/boi
FinCEN Frequently Asked Questions: https://www.fincen.gov/boi-faqs
Financial Crimes Enforcement Network (FinCEN): Small Business Resources
Important Disclaimer: This "Taxing Times Article" from Carolina Business Services is intended to provide general information about the Corporate Transparency Act (CTA) and is not intended as a substitute for legal advice.
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