As the January 13, 2025, deadline looms, many small business owners across the United States are required to submit their Beneficial Ownership Information (BOI) reports to comply with the Corporate Transparency Act (CTA).
The requirement is designed to enhance transparency and curb illicit activities, like money laundering and tax fraud.
The requirement applies to an estimated 32.6 million businesses, according to CNBC.
The CTA was enacted in 2021 and is effective from January 1, 2024. It requires corporations, limited liability companies, and other entities meeting specific criteria to file a report with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
Businesses established after January 1, 2024, must provide comprehensive details including the names, addresses, birthdays, and identification numbers of beneficial owners and company applicants. Entities in operation before this date are required only to disclose information pertaining to the business and its beneficial owners.
A “beneficial owner” is defined as any individual who either directly or indirectly owns or controls at least 25 percent of an entity or holds substantial control through their role or decision-making capacity. This includes senior officers, those with authority over corporate governance, and other significant decision-makers, according to the federal government.
The need for compliance is underscored by steep penalties for non-compliance. Businesses that fail to meet the deadline risk facing up to two years of imprisonment, fines of up to $10,000, and daily civil penalties of up to $591.
To help with the submission process, FinCEN has introduced the BOI E-Filing system that allows companies to electronically file their reports.
Federal officials have said the BOI system is part of a broader effort to collect and analyze ownership information more effectively to prevent the misuse of the U.S. financial system.
Business owners are urged to verify their status under the CTA and prepare their filings well ahead of the impending January deadline.
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