There are numerous legal paperwork requirements for business owners and investors. Recently, those obligations changed somewhat. The Corporate Transparency Act (CTA) took effect on January 1, 2024. New businesses formed in 2024 have to comply with the CTA as part of the startup process. Existing companies have a bit more time to ensure their compliance with this new law.
Businesses with structures that do not make ownership readily apparent now have to identify those with a beneficial ownership interest (BOI) to federal authorities. Businesses ranging from corporations to limited liability companies (LLCs) may now need to report the names of everyone with a BOI in the company. The deadline for the initial BOI filing for existing companies is the beginning of 2025, making reporting a pressing issue for companies that have not already addressed this new obligation.
What should a BOI report contain?
The BOI report submitted to the Financial Crimes Enforcement Network (FinCEN) needs to contain specific information. The organization must disclose the names of all parties with a 25% or higher interest in the company. Reporting also applies to those who helped establish the company by filing paperwork or those who guided another person through that process. The BOI report should include each parties’ full legal name, date of birth, home address and a photocopy of state-issued identification.
What happens to non-compliant businesses?
Not all companies have to file BOI documents with FinCEN. Large companies with dozens of employees and millions in annual revenue do not need to file. Nonprofit entities may also be exempt from reporting requirements. FinCEN can take enforcement actions against organizations that do not make necessary BOI disclosures. The possible penalties include financial penalties. Non-compliant businesses may need to pay up to $591 per day that the company remains noncompliant. There is also the potential for criminal prosecution that could result in up to two years in federal custody and $10,000 in fines.
BOI reporting is an important legal responsibility for many small businesses and startups. Having guidance when tracking and complying with changing federal business regulations can help those with an interest in a company avoid scenarios wherein their resources or reputations could be at risk.