The 2024 Corporate Transparency Act: Simplified

The Financial Crimes Enforcement Network is a bureau of the U.S. Department of Treasury.

 “FinCEN’s mission is to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities. FinCEN carries out its mission by receiving and maintaining financial transactions data; analyzing and disseminating that data for law enforcement purposes; and building global cooperation with counterpart organizations in other countries and with international bodies.”

The CTA seeks to combat money laundering, terrorist financing, and other illicit activities by enhancing the reporting requirements for business entities. It aims to safeguard U.S. corporations and LLCs from criminal exploitation and aid law enforcement in identifying illicit conduct.

FinCEN defines a beneficial owner as “any individual who exercises substantial control over your company, or who owns or controls at least 25 percent of your company.”

Starting on January 1, 2024, millions of small businesses will be obligated to submit a Beneficial Ownership Information (BOI) Report to FinCEN. This includes every corporation and LLC in the United States unless they meet the criteria for an exception.

FinCEN defines the date of creation or registration for a reporting company as the earlier of the following dates:

1. The date that the reporting company receives actual notice that its creation (or registration) has become effective; or
2. The date that a secretary of state or similar office first provides public notice, such as through a publicly accessible registry, that the domestic reporting company has been created or the foreign reporting company has been registered.

For Delaware entities formed with The Incorporators, this date will be the date that you receive the email (or physical package in the mail, if you've chosen a paper package) from The Incorporators with your Articles of Incorporation or Formation. This is typically the same day we get the document back from the Secretary of State. 

Yes. There are 23 exceptions for entities that meet specific requirements. Most notably, companies that meet all three of the following criteria are not required to file a BOI Report:

1. Company employs more than 20 people;
2. Company reports more than $5 million in gross receipts; and 3. Company has a physical presence in a business office in the United States.

Other exceptions include publicly traded companies and other entities that file reports with the SEC, banks, credit unions, money services businesses, securities brokers and dealers, tax-exempt entities, insurance companies, state-licensed insurance producers, pooled investment vehicles, public utilities, and accounting firms.

Companies required to submit a BOI report will provide the following information:

1. The company’s legal name and any trade name or DBA;
2. Company address;
3. The jurisdiction where it was formed or registered, whether it’s a U.S. or foreign company; and
4. Taxpayer identification number.

For each of your company’s beneficial owners and each company applicant (if required), your company will need to provide the individual’s:

1. Legal name;
2. Birthday;
3. Address (typically a home address);
4. An identifying number from a driver's license, passport, or other approved document for each individual, including an image of the document that number is from.

Companies formed on or after January 1, 2024 are required to provide the company applicant on their BOI Report. Up to two company applicants may be listed.

 There are two categories of company applicants:

Direct filer: Must be reported by all companies formed on or after January 1, 2024. This is the person who actually submits the company formation or incorporation documents to the secretary of state or similar office. If you use The Incorporators services to form your new entity, the individual in our office who submits the document will be the direct filer. We will give you the information necessary to include on your BOI Report.

Directs or controls the filing action: This is the person who is directly responsible for making the decision to form the new entity. Though they do not submit the document themselves, they have directed that the entity be formed.

Example:

On January 10, 2024, you purchase one of our LLC E-Kits to form your new LLC. When you file your BOI report, the member of The Incorporators team who submits the paperwork to the Delaware Secretary of State will be listed as the direct filer. You would be listed as a company applicant as well, as you directed that the entity be formed when you placed the order on our website.

Companies formed prior to January 1, 2024 are not required to list company applicants.

If your company was established or officially registered prior to January 1, 2024, you must submit your filing with FinCEN by January 1, 2025.

Any company formed on or after January 1, 2024 is required to submit a BOI Report to FinCEN within 90 days of receiving the formation or incorporation paperwork from the secretary of state or similar state office that originally created or registered the company.

One of the primary reasons for the delay in the implementation of the Corporate Transparency Act was to give FinCEN time to develop an online platform to collect Beneficial Ownership information from companies.

Filing will take place electronically through a secure filing system via FinCEN’s website. FinCEN anticipates that the platform will be available starting January 1, 2024.

Non-compliance carries substantial civil and criminal penalties, making it crucial for all small business owners to be aware of this new reporting obligation.

The CTA also establishes both criminal and civil penalties for individuals providing false information in connection with the beneficial ownership report and for entities failing to meet reporting obligations.

You can learn more about different scenerios and consequences in our blog post - Penalties for Non-Compliance with the Corporate Transparency Act. 

No, PO Box addresses may not be used as a company address on a BOI Report. The address must be a valid US street address. 

Yes, in fact, The Incorporators has partnered with FinCEN Report to allow our clients to ensure that their BOI Report are filed quickly and correctly. 

Click here to start your BOI Report now.

While we've answered many of the common questions here, we understand you may have more questions. FinCEN has recently released a helpful BOI Small Business Compliance Guide that details much of what we discussed above, as well as more specifics we may not have touched on.