🚨 The Deadline is Almost Here

What You Need to Know About the Corporate Transparency Act (CTA) and BOI Reporting Requirements

As a CPA assisting many business owners with tax compliance, I want to inform you about a NEW reporting requirement under the Corporate Transparency Act (CTA). Effective January 1, 2024, the CTA mandates that certain business entities report their Beneficial Ownership Information (BOI) to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) to enhance transparency and combat financial crime.

This new regulation has significant implications for business owners, including those living outside the U.S. Here’s what you need to know about the CTA, how to determine if your business must comply, deadlines to keep in mind, and how to self-file if you’re so inclined.

📅 Filing Deadlines and Key Dates

• For businesses created before January 1, 2024: BOI reports must be filed by January 1, 2025.
• For entities formed between January 1, 2024, and January 1, 2025: You have 90 days from the date of formation or registration to file.
• For new entities formed after January 1, 2025: The report is due within 30 days of formation.

If there are any changes to your business’s beneficial ownership information after filing, updates are required within 30 days of the change.  This could be an address change, an ownership change, or a change in the person with substantial control over the company. 

🔍 What Is Beneficial Ownership?

“Beneficial ownership” is defined as any individual who either (1) exercises substantial control over the company or (2) maintains ownership of 25% or more of the company. This includes anyone with significant decision-making authority within the company or who meets specific ownership thresholds.

📝 Does Your Business Need to File?

The CTA requires reporting from corporations, limited liability companies (LLCs), and other entities registered by filing with a state or tribal authority. This includes foreign entities authorized to conduct business within the U.S. Exemptions are available for some organizations, including publicly traded companies, nonprofits, and larger entities meeting specific employee and revenue requirements.

A notable court ruling in March 2024 added complexity to this issue. The U.S. District Court for the Northern District of Alabama ruled that the Corporate Transparency Act is unconstitutional in the case involving the National Small Business Association (NSBA). As a result, businesses within this specific class do not have to file BOI reports. However, this exemption ONLY applies to the named plaintiffs in that specific lawsuit. Other entities must still comply with BOI requirements unless new exemptions are granted through further rulings.

If your business has a single owner or a simple structure, self-filing may be straightforward. I self-filed my own BOI report and found the process to be quick and easy. However, determining if your entity is exempt or has more complex ownership arrangements may require legal expertise.

🧾 Does Your Trust Need to File?

Under the Corporate Transparency Act (CTA), most trusts are not considered reporting entities because they are generally not created by a state filing, a key requirement for reporting companies. However, if a trust owns or controls a reporting company (such as an LLC or corporation), that company must file a BOI report and may need to disclose the trust’s beneficial owners. Exceptions may apply to statutory trusts created through state filings, which could require BOI reporting under the CTA.

📆 How Often Do I Need to File?

The good news is that BOI reporting is generally not an annual requirement. Once your business files its initial BOI report, no further filing is needed unless there is a change in beneficial ownership information. Updates are required within 30 days if there is any significant change to the information in the report. This might include a new beneficial owner, changes in control, or changes to the company’s principal address. Keeping track of these details is essential to ensure compliance with the CTA and avoid costly penalties.

🌐 How to File Your BOI Report

Business owners can file their BOI report online through FinCEN’s website (www.fincen.gov/boi). The system will confirm receipt of your filing once completed. There is no fee for filing, but non-compliance can lead to daily penalties and possible criminal charges.

If you prefer to file through a third-party service, there are several reliable options. I would recommend Gusto, Tax1099, or Harbor Compliance for BOI filing services.  These options come at a reasonable cost if you don’t want to file it on your own.

🌎 BOI Filing Requirements for Expat and Foreign-Owned Businesses

For my expat clients and those who may own foreign companies, here’s a quick overview of what applies to you:

• Foreign entities: Only those registered to conduct business in the U.S. need to comply with the BOI requirements.
• U.S. businesses owned by expats: Your business must report BOI if it meets the reporting criteria, regardless of where you live or operate.

⚠️ Seeking Legal Counsel

Since the CTA is a legal reporting requirement, I strongly recommend consulting a qualified attorney to determine if your specific business is exempt, and to understand the nuances of beneficial ownership. This is especially important if you have a multi-owner structure or complex business arrangements. While I aim to provide awareness and general guidance, Matriarch Tax & Advisory does not prepare BOI filings or offer legal services related to this compliance requirement.

🚨 Penalties for Non-Compliance

Willful failure to file accurate BOI reports can result in penalties of $500 per day, with an annual cap of $10,000, and may even lead to criminal charges. Compliance is critical to avoid these penalties.

📲 Resources and Links

For further information, including filing instructions and exemption criteria, FinCEN’s Small Entity Compliance Guide is a valuable resource. You can also access the BOI filing portal here: www.fincen.gov/boi.