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FAQ

The Corporate Transparency Act

An Overview of the CTA

The Corporate Transparency Act (CTA) is a pivotal piece of legislation enacted as part of the comprehensive William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, recently approved by Congress.

 

Representing one of the most substantial regulatory changes in recent decades, the CTA requires business owners to provide detailed information regarding their company's ownership to the federal government.

FinCEN is the abbreviation for the Financial Crimes Enforcement Network, a bureau of the U.S. Department of Treasury. It is a division of the federal government.

 

You can visit the FinCEN website here.

The Financial Crimes Enforcement Network (FinCEN) is dedicated to protecting the financial system from illegal activities, particularly money laundering, and enhancing national security. This involves gathering, analyzing, and sharing financial intelligence, as well as strategically employing financial authorities.

 

FinCEN achieves its mission by acquiring and managing financial transaction data, analyzing and distributing the information for law enforcement needs, and fostering global collaboration with counterpart organizations and international bodies.

The main goal of the CTA is to beef up the rules to tackle issues like money laundering, terrorist financing, and other illegal activities. 

 

It's basically all about protecting U.S. companies and LLCs from being used for illegal activities. At the same time, it helps law enforcement spot and stop illegal behavior. 

All About Beneficial Ownership Information

FinCEN defines a beneficial owner as “any individual who exercises substantial control over your company, or who owns or controls at least 25 percent of your company.”

Companies that are required to submit a BOI Report are called "reporting companies."

Reporting companies include corporations and LLCs created in the United States as well as foreign companies registered to do business in the United States, unless they meet one of the 23 exemptions.

BOI reports will collect the following details from reporting companies:

  • The company’s legal name and any trade name or DBA;
  • Company address;
  • The jurisdiction where it was formed or registered, whether it’s a U.S. or foreign company; and
  • Taxpayer identification number (typically the company's EIN).

If you start your company on or after January 1, 2024, you will be required to submit a BOI report to FinCEN within 90 days of receiving your formation or incorporation paperwork from the secretary of state or similar entity. If you have an existing entity (established in 2023 or earlier), you are required to submit a BOI report by the end of the 2024 calendar year. 

 

This report allows for the listing of two distinct types of company applicants.

 

The first category is the "Direct Filer." This individual is required to be disclosed by all companies formed on or after January 1, 2024. The direct filer is the party responsible for submitting the entity formation documents—commonly referred to as articles of incorporation or formation (although the document nomenclature may vary by state)—to the secretary of state or an equivalent office.

 

In instances where IncEasy is utilized for the new entity formation, the IncEasy staff member responsible for submitting the documents to the state assumes the role of the direct filer. All of the information required to be included in the report will be provided by us when we email you your finalized documents. 

 

The second category involves the individual who "Directs or Controls the Filing Action." This refers to the decision-maker within your company who orchestrates the formation of the new entity.

 

If, for instance, you place an order for an LLC package on inceasy.com and we form an LLC on your behalf, you still qualify as the company applicant because you are the driving force directing the formation process.

Yes, there are 23 categories of businesses that are exempt from being required to submit a BOI Report to FinCEN.

 

The major exceptions include publicly traded companies, non-profits (though only if you have applied for and received 501(c)(3) status with the IRS), and certain large operating companies.

 

If you believe your company may qualify for an exemption, you can view the full list as well as the criteria for each exemption on page 10 of the BOI Small Business Compliance Guide by FinCEN.

No, unless the sole proprietorship has submitted paperwork to the secretary of state or a similar office. It is recognized as a reporting company only when it has officially filed a formation document in the United States.

 

Sole proprietorships that have acquired an EIN number from the IRS, a fictitious business name, or obtained a professional or business license but have not completed the necessary documentation with the secretary of state (or a comparable registered office) are not categorized as reporting companies.
No, reporting companies do not have to report information about parent or subsidiaries. FinCEN issued clarification on this matter by stating: "No, though if a special reporting rule applies, the reporting company may report a parent company’s name instead of beneficial ownership information. A reporting company usually must report information about itself, its beneficial owners, and, for reporting companies created or registered on or after January 1, 2024, its company applicants. However, under a special reporting rule, a reporting company may report a parent company’s name in lieu of information about its beneficial owners if its beneficial owners only hold their ownership interest in the reporting company through the parent company and the parent company is an exempt entity." Additional clarification may be found in the Small Entity Compliance Guide, issued by FinCEN.

Important Filing Dates and How to Submit

Companies that are established or officially registered prior to January 1, 2024 are required to submit a BOI report by January 1, 2025.

 

Companies formed on or after January 1, 2024 are required to file a BOI report with FinCEN within 90 days of receiving their finalized documents from the state of formation.

FinCEN is currently developing an online platform to securely collect beneficial ownership information from companies. When the platform is finalized, filing can take place through this secure system. FinCEN anticipates that the platform will be available starting January 1, 2024.

 

If you'd like to get a jump start on your filing to ensure that you don't miss the deadline and accrue fees or penalties, you can get started now using our partners at FileForms.

 

FileForms can help you determine if your business is considered a reporting entity and is therefore required to file a BOI Report. If you are, you can utilize the FileForms platform to file your BOI Report with confidence. They have packages to meet the needs of every company, which all include form compliance validation and automated beneficial ownership validation. Get the support you need to ensure that your BOI Report is filed correctly. 

No, the address of a reporting company must be a U.S. street address. 

FinCEN has issued clarification about what date should be used as your company creation date.

This date is important because from this date, you have 90 days to submit your BOI report with FinCEN.

FinCEN has determined that the date that is used is the ealier of these:

  1. The date that the reporting company receives actual notice that its creation (or registration) has become effective; or
  2. The date that a secretary of state or similar office first provides public notice, such as through a publicly accessible registry, that the domestic reporting company has been created or the foreign reporting company has been registered.

If you'd like to get a jump start on your filing to ensure that you don't miss the deadline and accrue fees or penalties, you can get started now using our partners at FileForms.

 

FileForms can help you determine if your business is considered a reporting entity and is therefore required to file a BOI Report. If you are, you can utilize the FileForms platform to file your BOI Report with confidence. They have packages to meet the needs of every company, which all include form compliance validation and automated beneficial ownership validation. Get the support you need to ensure that your BOI Report is filed correctly. 

Fees and Penalties

There are substantial penalties for companies that fail to file a BOI Report. While FinCEN has implied that it will focus it's attention on companies who willfully fail to report or who file incorrect information intentionally, all companies should plan to file a BOI Report and take FinCEN's regulations seriously. 

 

FinCEN states:

 

"The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure. "
Both individuals and corporate entities face potential liability for intentional violations. This includes not only the person who directly submits false information to FinCEN but also those who knowingly provide the filer with inaccurate information. Both individuals and corporate entities can also be held accountable for willfully neglecting to report comprehensive or updated beneficial ownership details. In such cases, individuals may be held responsible if they either contribute to the failure or hold a senior position within the company at the time of the failure.

Yes, any individual who willfully files an inaccurate or fraudulent BOI report may be subject to a civil penalties of $500 per day and criminal penalties of up to two years and a fine of up to $10,000.

That qualifies as willfully failing to file a BOI report and you'd be subject to civil penalties of up to $500 per day and criminal penalties of  up to two years in prison and a fine of up to $10,000.