In January 2021, Congress passed the Corporate Transparency Act (CTA) with the main objective of combating money laundering and other illegal activities. The CTA mandates that companies established or registered in the United States must provide information about the individuals who have ownership or control over the entity. To comply with the CTA, entities are obligated to submit a report containing beneficial ownership details to the Financial Crimes Enforcement Network (FinCEN), which operates under the Treasury Department.
The final rule describes two categories of reporting companies:
1. A domestic reporting company is a corporation, LLC, or any entity established by filing with the Secretary of State or a similar office.
2. A foreign reporting company is a corporation, LLC, or other entity created in a foreign country but registered to operate in the United States by filing with the Secretary of State or a similar office.
The final rule includes 23 exemptions. If a company meets the requirements for an exemption, it will not be considered a reporting company and will not be required to file the BOI report.
Among the exemptions are companies that are already regulated, such as publicly traded companies, insurance companies, and broker-dealers. Additionally, there is an exemption for “large operating companies” which applies to entities that meet the following criteria: (1) have 20 or more full-time employees in the U.S., (2) filed an income tax return in the previous year with at least $5 million in gross receipts or sales, and (3) have an operating presence or physical office within the U.S.
1. All reporting companies, whether domestic or foreign, that were established prior to January 1, 2024, are required to submit a report by January 1, 2025.
2. For any reporting company, whether domestic or foreign, established on or after January 1, 2024, they must file a report within 30 calendar days of being notified of their registration or establishment.
• $500 per day civil penalty
• $10,000 fine or 2 years imprisonment
• 90-day Safe Harbor
FinCen is yet to release two additional rules and offer guidance on the reporting forms and the functioning of the filing process. RASi will keep you informed as we gain more knowledge about the filing procedure and the associated expenses. If you have any queries in the meantime, please contact us at [email protected].