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Understanding the Corporate Transparency Act: A Guide for Business Owners

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Anyone who owns a corporation, limited partnership, LLC or other business structure needs to be aware of the Corporate Transparency Act (CTA). The CTA is a law passed in 2021 that introduces new reporting requirements, which go into effect January 1, 2024. At Skabelund PLLC, we understand the importance of privacy in your asset protection plan, and we are here to assure you that the CTA does not make your information publicly available, especially to those seeking legal action.

What Does the Corporate Transparency Act Entail?

The CTA mandates that the Beneficial Ownership Information (BOI) of a company must be reported to the Financial Crimes Enforcement Network (FinCEN), a division of the United States Department of the Treasury. BOI is only available to government agencies for “authorized activities related to national security, intelligence, and law enforcement.”

Which Companies Must File a BOI?

Generally, if the company was formed by filing a document with the Secretary of State or other government agency, you must report.  However, the following are some notable exceptions:

  1. The company has more than 20 employees and grosses more than $5 million in receipts.
  2. The company is an accounting firm registered in accordance with Section 102 of the Sarbanes Oxley Act.
  3. The company is a tax-exempt entity.
  4. The company is inactive.  Inactive companies must meet the following guidelines:
    • The company was in existence on or before January 1, 2020.
    • The company is not engaged in active business.
    • The company is not owned by a foreign person, whether directly or indirectly, wholly or partially. 
    • The company has not experienced any change in ownership in the preceding twelve-month period.
    • The company has not sent or received any funds in an amount greater than $1,000, either directly or through any financial account in which the entity or any affiliate of the entity had an interest, in the preceding twelve-month period.
    • The company does not otherwise hold any kind or type of assets, whether in the United States or abroad, including any ownership interest in any corporation, limited liability company, or other similar entity.

Who Must be Included in the BOI?

A Beneficial Owner is someone who:

  1. Exercises substantial control, or 
  2. Owns more than 25% of the company.

In addition, after January 1, 2024, the company applicant must be reported too.  The company applicant is the party who files the company’s formation documents with the Secretary of State.

What Information Must be Reported for the Beneficial Owner?

The following will be required on the BOI:

  1. Full legal name;
  2. Date of birth;
  3. Residential address;
  4. Business address; and
  5. A copy of the driver’s license or passport

What Company Information Must Be Reported?

Companies are required to report their name, DBA, address, EIN, and the state in which they were organized.

Who May Access the BOI?

FinCEN will permit Federal, State, local, and Tribal officials and certain foreign officials who submit a request through a U.S. Federal government agency to obtain beneficial ownership information for authorized activities related to national security, intelligence, and law enforcement. Financial institutions will also have access to beneficial ownership information in certain circumstances, with the consent of the reporting company.

Reporting Requirements and Deadlines

Starting in 2024, most entities filing with their state Secretary of State (LLCs, Corporations, etc.) are obligated to report beneficial owners. New entities have 90 days from formation, while existing entities created before December 31, 2023, have until the end of 2024.  After 2024,  any new entity created starting in 2025 has only 30 days to file its BOI. 

If there are any changes or inaccuracies within the BOI, such new information must be filed within 30 days.

Why Was the Corporate Transparency Act Created?

Enacted to prevent financial crimes and terrorism, the CTA aligns with broader efforts to enhance corporate transparency and accountability.

How Is the Report Filed?

From January 1, 2024, onwards, reporting BOI must be done through a portal created by FinCEN, a department within the US Treasury.

Penalties for Non-Compliance

Failure to file the report properly may result in a $500 per day fine and up to two years of imprisonment and/or a $10,000 fine.


For further information, click here to read the BOI Small Compliance Guide.

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