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Attention small business owners! The federal government has changed the way you must operate when it comes to your business’s legal compliance. A new federal law will require companies to pay special attention to the new rules beginning January 1, 2024. The Corporate Transparency Act (CTA) will impose additional disclosure and reporting requirements on registered entities beginning this date.

The United States is a part of the Financial Action Task Force (FATF), a worldwide organization aimed at combatting bad actors in money laundering, tax evasion, and other corrupt financial activities. The United States’ implemented disclosure rules through the CTA in accordance with FATF guidance. The new federal law requires reporting companies to report information regarding their beneficial owners to a division of the Treasury Department, the Financial Crimes Enforcement Network (FinCEN). Beneficial Ownership Information Reports (BOI Report) will need to be filed for all Reporting Companies.

A Reporting Company is defined as “a corporation, limited liability company, or similar entity that is (i) created by filing a document with a secretary of state or similar office under the law of a State or Indian Tribe, or (ii) formed under the law of a foreign county and registered to do business in the United States by the filing of a document with a secretary of state or a similar office under the laws of a State or Indian Tribe.”[i] Several types of entities are exempt from the CTA’s reporting requirements, but the exemptions are mainly for the entities that are already subject to regulation, such as large banks or securities brokers.

A Beneficial Ownership Information (BOI) Report includes certain information about each of the Reporting Company’s Beneficial Owners. A Beneficial Owner is “an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise (i) exercises substantial control over the entity, or (ii) owns or controls not less than 25 percent of the ownership interests of the entity.”[ii] An individual has substantial control of the Reporting Company if they greatly influence or determine important decisions. Each senior officer is deemed to have substantial control over the Reporting Company and is a Beneficial Owner, whether the senior officer actually owns a portion of the company.[iii] Included are the individual’s legal name, date of birth, residential address, unique identifying number from an identification document, and the state or jurisdiction that issued said identification document.[iv] Approved identification documents include a driver’s license, a state or federal ID document, and a U.S. passport. In its initial BOI report, the Reporting Company must also include certain information about itself, including legal name, any trade names, the current street address of its principal place of business, jurisdiction of formation or registration, and TIN.[v]

Each Reporting Company is solely responsible for ensuring their entity is compliant before the proper deadline and to keep the information on record up to date. If the Reporting Company was created before January 1, 2024, the deadline is January 1, 2025.[vi] For any Reporting Company created after January 1, 2024, the deadline is thirty (30) calendar days from the date it receives notice of authorization to do business.[vii] If at any time the most recent BNI report becomes inaccurate, the Reporting Company must file an updated report within thirty (30) calendar days from the date that the change occurred.[viii] The violation for failing to submit a report before the proper deadline or failing to report accurate information on a submitted report is civil or criminal fines up to $10,000 and up to two years in jail.

BOI Reports will need to be filed for nearly all small businesses in the United States. Navigating the text of the new law may be overwhelming and you may find yourself in need of assistance before the arrival of compliance deadlines. Contact Rosenacker Law Office to gain valuable advice on reporting compliance under the CTA.

__________________________________________________________________________________ [i] 31 U.S.C. §5336(a)(11) [ii]31 U.S.C. §5336(a)(3) [iii] 31 CFR §1010.380(d)(1). [iv] 31 U.S.C. §5336(b)(2)(A) [v] 31 CFR §1010.380(b)(1)(i) [vi] 31 CFR §1010.380(a)(1)(iii) [vii] 31 CFR §1010.380(a)(1)(ii) [viii] 31 CFR §1010.380(a)(2)(i) The blog published by Frank B. Rosenacker Co., LPA is available for informational purposes only and is not considered legal advice on any subject matter. By viewing blog posts, the reader understands there is no attorney-client relationship between the reader and the blog publisher. The blog should not be used as a substitute for legal advice from a licensed professional attorney, and readers are urged to consult their own legal counsel on any specific legal questions concerning a specific situation.

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