The Corporate Transparency Act (CTA), aimed at combating illicit financial activities, went into effect on January 1, 2024. Under this law, small businesses across the United States must file a Beneficial Ownership Information Report, also known as a Corporate Transparency Report.
Here's everything small business owners need to know about filing a corporate transparency report.
[Read More: What Every Small Business Needs to Know About the Corporate Transparency Act]
What you need to know about beneficiary information reports
The CTA was developed to increase transparency in business ownership and reduce the use of anonymous shell companies for tax evasion, money laundering, and other illicit financial activities. Under this law, all companies that meet the definition of a reporting company are required to file a Beneficial Ownership Information Report (BOIR) with the Financial Crimes Enforcement Network (FinCEN).
A reporting company is a private company registered to do business in the United States, whether domestic or foreign. Publicly traded companies are subject to their own reporting requirements and therefore do not fall under the CTA.
Beneficiary means an individual who owns or controls at least 25% of the organization or who exercises substantial control, directly or indirectly, in one of the following roles:
- They serve as senior executives such as presidents, CEOs, and general counsel.
- They have the power to appoint or dismiss senior officers, board members, or other similar roles.
- They make important decisions regarding the company's operations, finances, and structure.
[Read More: How to Prevent Bank Fraud and Protect Your Business Account]
Small business reporting requirements
Eligible small businesses must report the following information about their company:
- The official legal name of the company.
- Company address. We cannot accept applications in PO boxes or law offices.
- The state or tribal jurisdiction in which the company is incorporated or first registered.
- Taxpayer identification number and identification documents such as submitted articles of incorporation or organization.
A company's transparency report must also include the following information about beneficial owners:
- Name and date of birth.
- home address. We cannot accept applications in PO boxes or law offices.
- A copy of your U.S. driver's license or passport.
Under this law, all companies that meet the definition of a reporting company are required to file a Beneficial Ownership Information Report (BOIR) with the Financial Crimes Enforcement Network (FinCEN).
How to submit a corporate transparency report
Starting January 1, 2024, FinCEN began accepting beneficial ownership information reports. Here are four steps you can take to create a corporate transparency report.
1. Determine whether your business needs to declare.
Under the CTA, LLCs and corporations must file a beneficial ownership information report unless they qualify for an exemption. The following entities are exempt from reporting:
- Major business company. In the United States, he has 20 or more full-time employees and his total sales or receipts from U.S.-based sources exceed $5 million.
- Inactive entities established before January 1, 2020.
- Other exemptions from CTA reporting. If you are unsure whether your business qualifies for other CTA reporting exemptions, please consult an attorney.
If your company is not an LLC or corporation, please check to see if your business falls within the definition of a reporting company as defined above. A legal professional may also be able to assist you in this decision.
2. If your business qualifies, find out who the beneficiaries are.
List the individuals who own or control 25% of your company, or have substantial control as defined above. If you are unsure whether an individual meets the beneficiary requirements, please consult a legal professional.
Once you have identified your beneficiaries, contact each beneficiary and let them know that the CTA requires your company to report their personal information to FinCEN. Beneficiaries may choose to apply for a FinCEN ID and provide information directly to FinCEN. Otherwise, the company can send the required information directly to you (the company) for inclusion in your business' beneficial ownership information report.
3. Create the procedure.
Whether your beneficiaries submit information through FinCEN or to your company, establish a process to keep all personal information organized, secure, and up-to-date. In addition to your initial report, you must submit an updated report if your personal information or beneficial ownership changes.
[Read More: How to Choose the Best Business Entity for Your Small Business]
4. File your report online.
All companies required to file a beneficial ownership information report must do so online through FinCEN. You can submit in one of two ways:
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Complete and upload your PDF. Download a copy of the blank BOIR form here as a PDF and fill out your information. You can then use this page to upload your completed PDF. Please note that you will need Adobe Acrobat to open and complete this PDF.
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Use FinCEN's online platform. If you do not have Adobe Acrobat or simply want to complete and file your BOIR within the FinCEN platform, please visit this page and follow the instructions. You will need to enter information for each beneficiary and upload a photo of their ID.
Reporting companies established before January 1, 2024 must file their first corporate transparency report by January 1, 2025. Companies formed between January 1, 2024 and January 1, 2025 must file within 90 days of the notification of incorporation or public notice, whichever occurs first.
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