February 8, 2024
By Diane Gist, ITC Trade Specialist, Illinois SBDC-ITC at the Joseph Center (Forest Park, Illinois)
What is the Corporate Transparency Act (CTA)?
Enacted in 2021, the CTA aims to combat illicit activity including tax fraud, money laundering, and financing for terrorism by capturing more ownership information for specific U.S. businesses operating in or accessing the country’s market. Under the new legislation, businesses that meet certain criteria must submit a Beneficial Ownership Information (BOI) Report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), providing details identifying individuals who are associated with the reporting company.
Beginning January 1, 2024, companies across the U.S. will have to report information about their beneficial owners (those who directly or indirectly own and control the company) in a Beneficial Owners Information (BOI) Report. Approximately 97% of small businesses will be required to file a BOI report in 2024. Companies must report this information to the Financial Crimes Enforcement Network (FinCEN) a bureau of the U.S. Department of the Treasury.
The mission of the Financial Crimes Enforcement Network is to safeguard the financial system from illicit use, combat money laundering and its related crimes including terrorism, and promote national security through the strategic use of financial authorities and the collection, analysis, and dissemination of financial intelligence.
According to the CTA, an individual qualifies as a beneficial owner if they directly or indirectly have a significant ownership stake in a company. This person either has a major influence on the reporting company’s decisions or operations, owns at least 25% of the company’s shares, or has a similar level of control over the company’s equity.
What is the beneficial ownership information reporting process?
Beginning January 1, 2024, reporting companies will have a limited time to file their initial BOI reports. For qualifying reporting companies established before January 1, 2024, the filing deadline is January 1, 2025. Those created between January 1, 2024, and January 1, 2025, will have 90 days from either the actual notice of formation or public announcement, whichever comes first to file. Businesses established on or after January 1, 2025, will have 30 days from notification or public announcement of their formation to submit their first report to FinCEN.
Two types of reporting companies will be required to submit BOI reports: domestic reporting companies, including LLCs, corporations, and other entities formed through filing with a secretary of state or a comparable office in the U.S.; and foreign reporting companies that are registered to conduct business in the United States through filing with a secretary of state or an equivalent office.
What must I do as a business owner?
To report your company’s beneficial ownership information to FinCEN, you will do so electronically through a secure filing system available via FinCEN’s BOI E-Filing website at (https://boiefiling.fincen.gov). Required documentation, business EIN/TIN and a non-expired government issued identification of person completing the report. You will also find additional information and answers to frequently asked questions (FAQs). You have until January 1, 2025, to file a BOI report.
Resources used to complete this notification: Beneficial Ownership Information Reporting (https://www.finCEN.gov) and Corporate Transparency Act – What You Need to Know | CO – by US Chamber of Commerce (https://uschamber.com).