The New Annual Report Your Business May Need To File
Dec 03, 2023
The New Annual Report Your Business May Need To File
Beneficial Ownership Information (BOI) & The Corporate Transparency Act (CTA)
There is an important change that will affect many businesses starting on January 1, 2024. It's called the Corporate Transparency Act (CTA), which is part of the National Defense Authorization Act for Fiscal Year 2021. This law says that certain businesses must share information about who owns them.
This big update is meant to help the U.S. law enforcement stop crimes like money laundering and terrorism financing. It's different from tax rules because it falls under the Bank Secrecy Act. This means that instead of sending reports to the IRS, businesses will need to send them to the Financial Crimes Enforcement Network (FinCEN), which is part of the Department of Treasury.
You can access FinCEN's "BOI Small Entity Compliance Guide" here. The key highlights are as follows:
Who Needs to Report?
- U.S. Entities: This includes corporations, LLCs, or similar groups registered with a state secretary or a similar office.
- Foreign Entities: These are similar groups formed in another country but registered to do business in the U.S.
Exemptions
- There are 23 categories that are exempt*, including publicly traded companies, banks, credit unions, and tax-exempt organizations. However, these exemptions are specific, and many of these groups already follow other reporting rules.
- "Large operating entities" with over 20 U.S. employees, more than $5M in annual gross revenue, and a physical U.S. presence.
* See excerpt below of the 23 categories as shown by Chart 2 in the BOI Small Entity Compliance Guide (full document provided by FinCEN here).
What's a Beneficial Owner?
- It's a person who has a lot of control** or at least a 25% ownership in a reporting company. The law explains "substantial control" in more detail.
** See excerpt below of the criteria for "substantial control" as shown by Chart 3 in the BOI Small Entity Compliance Guide (full document provided by FinCEN here).
When to Report?
- New Entities (from 1/1/24): Report within 30 days (there might be a 90-day extension for entities created in 2024).
- Existing Entities: Report by 1/1/25.
- Updates or Corrections: Report within 30 days if there are changes or mistakes.
What Information is Needed?***
- Company details like name, business address, where it was formed, and TIN.
- Beneficial owner information, including personal details and ID documents.
*** See excerpt below of the information to be reported as shown by Chart 7 in the BOI Small Entity Compliance Guide (full document provided by FinCEN here).
What Happens if You Don't Follow the Rules?
- There are big penalties! Not reporting properly can lead to fines up to $10,000, daily penalties of $500, and you might even go to jail for up to two years.
If you have questions or want to talk about how this affects your business, please contact us at 234.207.5772 or [email protected]. If you are a current accounting client of Profit Scale Thrive, we will discuss this during our next meeting this month.
In today's changing rules, it's important to stay on top of new requirements. We're here to work together with you. Our goal is not only to help you with your accounting and taxes but also to make sure you follow the law!
Not a client of Profit Scale Thrive? This is one example of the type of conversations we routinely have with our accounting and tax clients. Interested in learning more about how we work with our clients? Check out our services here or contact us to schedule a meeting here.
There’s no reason to delay having the life you want to live.
Find out how we work with our clients to manage their firm so they enjoy overflowing profits with scaled growth and have thriving lives.
Click the button below to schedule your curiousity call now.