Avoiding Penalties Under The Corporate Transparency Act
As you have likely heard and as we have previously reported, the Corporate Transparency Act requires that many entities provide identifying information to the Financial Crimes Enforcement Network (FinCen) about the entity and its "beneficial owners".
Reporting companies formed before January 1, 2024 have to file their Beneficial Ownership Information (BOI) report by January 1, 2025. Reporting companies formed during 2024 have 90 calendar days from formation/registration to provide information. If formed after 2024, the report is due within 30 days of formation/registration. The BOI report is a one-time filing, unless the information needs to be updated (e.g., change in CEO). Any updates or corrections must be submitted within 30 days.
There are limited exceptions to filing the BOI report. Most important, "large" operating companies that have more than 20 full-time employees AND gross receipts in excess of $5 million generally are exempt from filing. FinCen has identified 23 other general exemptions, including most nonprofit organizations. We encourage you to visit the detailed information at: https://fincen.gov/boi.
Non-compliance could result in penalties of $591 per day for each day the violation continues, or up to two years imprisonment and a fine of up to $10,000.
Many owners will find the reporting easy, if for instance, the entity has only one owner with limited officers. A single-member (disregarded) LLC that owns a rental property or a one owner-operator S Corporation are prime examples. The report can be filed electronically at the FinCen site and should take under an hour for those types of entities. For other entities with multiple owners and/or multiple officers, the reporting can get onerous. Note that a "beneficial owner" can be an individual who owns 25% or more of the company or who has "substantial control".It is important to note that the BOI report is not a tax filing that falls under any engagement arrangement you may have with WBL. Determining your filing obligation and completing your report(s) are wholly your responsibility. However, we would be interested in knowing what you decided to do in order to comply IF required.
As always, WBL advisors are available to discuss your specific issues or needs.