Updated: 3 December 2024
In 2021, Congress enacted the bipartisan Corporate Transparency Act to curb illicit finance. This law requires many companies doing business in the United States to report information about who ultimately owns or controls them. This law required many businesses to file a Beneficial Owner Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN) before January 1, 2025, or face financial penalties. If you are a small business owner, completing this registration process should be on your “to do” list!
What businesses must file:
Your company may need to report information about its beneficial owners if it is:
a corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe; or
a foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing.
It does not matter whether your company does any business with the Government. Most US small businesses will be required to file.
What businesses are exempt from the requirement to file:
Twenty-three (23) types of entities are exempt from beneficial ownership information reporting requirements, including publicly traded companies, nonprofits, banks, credit unions, brokers or dealers in securities, and certain large operating companies. See the following guide for more information: https://www.fincen.gov/boi/small-entity-compliance-guide.
What must be reported:
If your company is a reporting company, your first step is to identify its beneficial owners. A beneficial owner is any individual who, directly or indirectly:
Exercises substantial control over a reporting company, OR
Owns or controls at least 25 percent of the ownership interests of a reporting company.
See the above guide to gain a full understanding of these ownership interest terms. To file your report, you will need to gather the following information:
Full legal name of the Reporting Company
Any trade name or “doing business as” (DBA) name
Complete, current US address
IRS taxpayer identification number (TIN), including an employer identification number (EIN)
The full legal name of each beneficial owner and (in certain cases) each company applicant
Date of Birth for each beneficial owner
Residential address of each beneficial owner
Unique identifying number and issuing jurisdiction from, and an image of, ONE of the following non-expired documents:
US passport
State driver’s license
Other ID issued by a State, local government or tribe
If an individual does not have any of the above documents, foreign passport
When to File:
The U.S. Department of the Treasury, Financial Crimes Enforcement Network (FinCEN) began accepting reports on January 1, 2024.
If your company was created or registered prior to January 1, 2024, you have until January 1, 2025, to report BOI.
If your company is created or registered in 2024, you must report BOI within 90 calendar days after receiving actual or public notice that your company’s creation or registration is effective, whichever is earlier.
If your company is created or registered on or after January 1, 2025, you must file BOI within 30 calendar days after receiving actual or public notice that its creation or registration is effective.
Any updates or corrections to beneficial ownership information that you previously filed with FinCEN must be submitted within 30 days.
How to File:
Reporting companies report beneficial ownership information electronically through FinCEN’s website: www.fincen.gov/boi. The system provides a confirmation of receipt once a completed report is filed with FinCEN. FinCEN claims that filing is simple, secure, and free of charge. Beneficial ownership information reporting is NOT an annual requirement, however, reporting companies must update information within 30 days of any change to previously filed BOI reports.
One final note:
On March 1, 2024, in the case of National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.), a federal district court in the Northern District of Alabama, Northeastern Division, entered a final declaratory judgment, concluding that the Corporate Transparency Act exceeds the Constitution’s limits on Congress’s power and enjoining the Department of the Treasury and FinCEN from enforcing the Corporate Transparency Act against the plaintiffs. The Justice Department, on behalf of the Department of the Treasury, filed a Notice of Appeal on March 11, 2024. While this litigation is ongoing, FinCEN will continue to implement the Corporate Transparency Act as required by Congress, while complying with the court’s order. Other than the individuals and entities subject to the court’s injunction, reporting companies are still required to comply with the law and file beneficial ownership reports as provided in FinCEN’s regulations.
Update as of 3 December 2024:
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against enforcement of the Corporate Transparency Act (CTA). In Texas Top Cop Shop, Inc., et al. v. Merrick Garland, Attorney General of the United States (E.D. Tex., No. 4:24-cv-00478), Judge Amos L. Mazzant stated that the CTA “is likely unconstitutional” and the CTA is “hereby enjoined, and the compliance deadline is stayed…[neither] may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”
Small businesses have two choices at this point 1) closely monitor the on-going legal developments and, if the injunction is lifted or the decision is overturned (most likely at the US Supreme Court) be ready to file your report by the (potentially revised) deadline, or 2) go ahead and file your report before the January 1 2025 deadline, as if the injunction were not in place. We believe the latter is the conservative and lowest risk approach.
Prepared by Tom Wells, Vice President, Dayton Aerospace Inc.