Hi Friendos,
Today’s topic is a new corporate reporting requirement that applies to most companies in the U.S. If you run a small business or live in a home with an HOA, check it out to make sure you’ll comply.
What is this requirement? The Corporate Transparency Act became effective at the beginning of this year and is an anti-money laundering law. It requires companies to disclose their ultimate “beneficial owners” to the U.S. Treasury, specifically, to the Financial Crimes Enforcement Network (FinCEN). If a company’s direct owner is an anonymous shell corporation (or a string of them in turn), you need to know who owns the shell corporation in order to determine the company’s true, “beneficial” owner.
The U.S. Treasury stated in a press release about this new reporting requirement, “Generally, reporting companies must provide four pieces of information about each beneficial owner:
- name;
- date of birth;
- address; and
- the identifying number and issuer from either a non-expired U.S. driver’s license, a non-expired U.S. passport, or a non-expired identification document issued by a State (including a U.S. territory or possession), local government, or Indian tribe…An image of the document must also be submitted.”
Does this apply to my company? If you own 25%+ or “exercise substantial control” over a company (e.g., are on the board of directors, are a corporate officer, or any kind of important decision-maker for the company), you’ll want to check whether that company has filed a Beneficial Ownership Report with FinCEN. In this context, “company” means some kind of legal entity created by filing paperwork with a state, such as a corporation, LLC, partnership, or other state-registered entity. There are exemptions for certain types of companies, generally those that are already subject to heavier regulation.
- A sole proprietorship with just a DBA (doing business as) does not need to report under this law (see question C.6 on the FAQ page).
- An LLC, S-Corp, partnership, trust, or other type of registered entity probably does need to report.
- Most homeowners’ associations (HOAs), condo corporations, and coop corporations will also need to file. (see question C.9 on the FAQ page).
Where, when, and how do I file? Existing entities have until the end of 2024 to file. Entities created during 2024 must file within 90 days of being created. If you own an existing entity, I recommend taking care of this right away so you don’t forget. It took me well under half an hour to do it for Frequently Taxed Questions, including taking a photo of my driver’s license, saving the file to my computer so I could upload it, and all the other little steps like saving a pdf of my submission transcript.
You file on the FinCEN website: https://boiefiling.fincen.gov/.
There is no annual filing requirement or requirement to file at specified intervals. Companies need to do an initial filing and then file updates only when ownership or control of the company changes, or when other information submitted changes. If your small business shares your home address and you move, you’ll want to submit that updated address information to FinCEN.
How much will this cost me? There is no filing fee. The cost is time it takes to file.
What if I am required to file but don’t? It’s a new law, so there is no history we can point to and say: well, here’s what typically happens. That said, the law states a person willfully violating the reporting requirements can be fined up to $500/day (this amount will be adjusted for inflation) and could be subject to up to two years in prison. I’m a rule follower so of course I say: just submit the filing and call it a day.
Got other questions? Check out the FAQ page, it’s good! It might answer your question directly.
-Stephanie
Frequently Taxed Questions 