The Corporate Transparency Act (CTA) introduces significant changes in the reporting requirements for businesses in the United States. This article aims to provide a clear understanding of the essential aspects of filing beneficial ownership information under the CTA.
This Article Covers
- CTA Essentials: Understanding the key aspects of the Corporate Transparency Act (CTA) and its significance in enhancing transparency in business ownership.
- Beneficial Ownership Information: Recognizing who qualifies as a beneficial owner and the vital information they must provide, including names, addresses, dates of birth, and more.
- How to File: Comprehending the mandatory reporting requirements under the CTA, aimed at preventing the misuse of shell companies for illicit purposes.
- FincenFetch Platform: Exploring the benefits of using the FincenFetch platform, including exemption verification, streamlined reporting, and simplified compliance procedures.
The United States has many registered companies, but only a few states or territories make them tell who owns or controls these companies. This lack of transparency is a problem because it lets terrible people, like criminals and corrupt officials, hide their identities and move illegal money through the U.S. using fake companies.
To fix this, in 2021, the U.S. Congress – with support from both political parties – made a new law called the Corporate Transparency Act (CTA). This law makes most U.S. companies share information about who owns them with the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). FinCEN will keep this information safe and only share it if there’s a criminal investigation or banks need it for their research.
What is Beneficial Ownership Information?
Beneficial owners are individuals who meet specific criteria: they either own 25 percent or more of a company’s ownership interests (whether directly or indirectly), or they exert significant control over the company (directly or indirectly).
It’s important to understand that being a beneficial owner extends beyond being a legal owner of the company; it also encompasses individuals who have a substantial role in the company’s operation, even if they don’t hold shares. Each beneficial owner must provide essential information, including their name, residential address, date of birth, and a government-issued identification document.
Additionally, businesses must furnish details about themselves, such as their legal entity name, place of formation, primary operational address, and any alternative names they operate under. For entities established after 2024 with the assistance of third parties, such as law firms, it’s also necessary to include their information in the reporting process.
Why Report Beneficial Ownership Information?
The CTA, passed by Congress in 2021, mandates the reporting of beneficial ownership information to FinCEN under the U.S. Department of the Treasury. This legislation aims to enhance transparency and prevent the misuse of shell companies or opaque ownership structures for illicit purposes.
Who Must Report?
Reporting companies, as defined by the Corporate Transparency Act, encompass domestic entities formed within the United States and foreign companies operating under foreign laws but registered for U.S. business activities. It’s imperative to carefully examine the criteria, as 23 specific entity types are exempt from the reporting requirements.
Reporting Companies using TurboCTA will benefit from the platform’s built-in Exemption Verification tool, which simplifies and expedites reporting Beneficial Ownership Information by checking if your company qualifies for any of the 23 exemptions. It then provides step-by-step guidance throughout the rest of the filing procedure, for companies who are not exempt, enabling you to complete it in just 10 minutes.
Moreover, should your information change, using TurboCTA, you can file mandatory updates easily, ensuring continuous compliance without any complications.
Reporting Process for Corporate Transparency Act
When to Report BOI to FinCEN?
Beneficial ownership information reporting to FinCEN will start on January 1, 2024. Until then, FinCEN will not accept any beneficial ownership information reports. You can begin preparing by creating an account with FincenFetch (for law and accounting firms) or TurboCTA (for reporting companies).
Corporate Transparency Act Reporting Deadlines
- Reporting companies created or registered before January 1, 2024, must file their initial beneficial ownership information report by January 1, 2025.
- Reporting companies created or registered on or after January 1, 2024, have 30 days from the effective date of creation or registration to file their initial beneficial ownership information report.
How to File BOI Report Under the Corporate transparency act
Reporting your company’s beneficial ownership information can be done electronically through FincenFetch (for law or accounting firms) or TurboCTA (for reporting companies). Here’s a general outline of the process to file your BOI report:
- Understanding CTA Requirements:
- Familiarize yourself with the requirements and provisions of the Corporate Transparency Act to determine if your business falls within its scope or if any exemptions apply.
- Gather Necessary Information:
- Collect all the required information about your business and its beneficial owners, including names, addresses, dates of birth, social security numbers, and other relevant details.
- Create a FincenFetch or TurboCTA Account:
- If you are a business owner and want to file your own, create an account with TurboCTA to start the filing process.
- If you use a law or accounting firm for CTA compliance, they can create an account on the FincenFetch platform, where you submit your BOI report information..
- Complete the Form:
- Using TurboCTA or FincenFetch’s Fetch Link, complete the step-by-step directions provided within the platform. Provide all accurate and up-to-date information about your business and its beneficial owners.
- Review and Verify Information:
- Double-check all the information provided to ensure its accuracy and completeness. Errors or omissions can cause delays or compliance issues, potentially leading to civil penalties of up to $500 per day for each ongoing violation. Additionally, willful provision of false BOI or failure to report complete or updated BOI to FinCEN can result in fines of up to $10,000, imprisonment for up to two years, or both.
- Submit the Filing:
- Once you are confident that all information is accurate, submit the CTA filing through the TurboCTA or FincenFetch..
- Pay Any Applicable Fees:
- Be prepared to pay any associated filing fees.
- Maintain Records:
- Keep copies of all filings and related documentation for your records. This documentation will be necessary for future reference and audits.
- Compliance Monitoring for Updated Report:
- Continuously monitor your business to ensure ongoing compliance with the Corporate Transparency Act. Update your information with FincenFetch or TurboCTA as necessary, especially if there are changes in your beneficial ownership or information about a beneficial owner. This can include simple home address changes.
- Seek Legal Guidance:
- Given the complexity and potential legal implications of CTA compliance, reporting companies should consider consulting with legal experts utilizing the FincenFetch platform to ensure full compliance and address any specific concerns related to your business. You can find a firm at FincenList.
It’s essential to remain up-to-date with any developments or amendments to the Corporate Transparency Act that might impact your filing obligations.
Firms using FincenFetch’s Corporate Transparency Act filing platform offer their clients a significant advantage through a ‘Fetch Link.’ This link simplifies up-to-date reporting process, clarifies complex terms, reduces errors, and consolidates the necessary information for beneficial ownership reporting. It securely stores required documents and automatically saves clients’ progress during the reporting process.
If you’re a firm, schedule a demo to familiarize yourself with the platform well before the CTA deadline in January 2024. For reporting companies in search of firms utilizing the FincenFetch platform, visit FincenList to find a firm near you.
Completing Your BOI Report
Understanding and complying with the Corporate Transparency Act’s beneficial ownership reporting requirements is essential for businesses operating in the United States.
This legislation aims to enhance transparency, prevent misuse of corporate structures, and strengthen the nation’s security and law enforcement efforts.
Be sure to bookmark this page to stay informed about updates and deadlines.