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Corporate Transparency Act: What Small Business Owners Need to Know About Beneficial Ownership Information Filing

If you own a small business with fewer than 20 full-time employees and less than $5 million in gross receipts or sales, you may be required to report additional company information in the upcoming year. Starting January 1, 2024, most small businesses will be responsible for filing a Beneficial Ownership Information Report with the U.S. Treasury Department. Failure to file such a report before 2025 may result in penalties. 

BOI Report Background 

Enacted in 2021, the Corporate Transparency Act was created to prevent money laundering, tax fraud, terrorism financing and other illegal activities by requiring businesses to disclose corporate ownership.  Starting in 2024, every corporation, LLC or other entity created by filing a document under the law of a state or similar office will be required to file a Beneficial Ownership Information (BOI) Report with the U.S. Treasury Department’s Financial Crimes Enforcement Network, unless they are exempt. A beneficial owner is defined as an individual who (1) exercises substantial control over the reporting company or (2) owns 25% or more of the interest in the reporting company. 

Limited partnerships, LLPs, business trusts and general trusts may also be required to file. Filing requirements extend to both domestic and foreign entities registered to do business in the United States.  

Who is Exempt? 

Large operating companies and entities that are already subject to more intense regulation will be exempt from filing a BOI Report. These entities include: 

  • Large operating companies with (1) more than 20 full-time employees in the United States, (2) an operating presence at a physical office within the United States and (3), a federal income tax return from the previous year demonstrating more than $5 million in gross receipts or sales. 
  • Publicly traded companies and other entities that file reports with the SEC 
  • Governmental authorities 
  • Banks 
  • Credit unions 
  • Money services businesses 
  • Securities brokers and dealers 
  • Tax-exempt entities 
  • Insurance companies 
  • State-licensed insurance producers 
  • Pooled investment vehicles 
  • Public utilities 
  • Accounting firms  

When & How Can I File? 

Starting January 1, 2024, reporting companies will be able to file a report through FinCen’s website. Businesses created before January 1, 2024, must provide the company’s full legal name, any trade or DBA names, address of the place of doing business, jurisdiction of formation and taxpayer identification number. Beneficial owners must provide their full legal name, date of birth, current residential street address and unique identifying number (U.S. passport, driver’s license, state or local ID document, etc.) along with an image of the unique identifying document. Businesses created on or after January 1, 2024, must also provide information about their company applicants, which refers to any individual who directly files the document that creates the business. 

Next Steps 

While the program will not be open until 2024, there will be fines and penalties for companies who fail to file before January 1, 2025. There will be no additional fees when filing through FinCen’s website. If you have more questions about BOI Filing or how the Corporate Transparency Act affects your business, please reach out to your Janover professional or contact us today 

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