The Corporate Transparency Act went into effect in January of 2024, and may require your practice to report information about ownership to the government.

What is the Corporate Transparency Act?

Enacted in 2021, the CTA aims to combat illicit activity including tax fraud, money laundering, and financing for terrorism by capturing more ownership information for specific U.S. businesses operating in or accessing the country’s market. Under the new legislation, businesses that meet certain criteria must submit a Beneficial Ownership Information (BOI) Report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), providing details identifying individuals who are associated with the reporting company.

The CTA was established to prevent individuals with malicious intent from hiding or benefitting from the ownership of their U.S. entities to facilitate illegal operations which, according to Congress, is a widely-used tactic that affects national security and economic integrity.

What types of companies must submit BOI reports?

Domestic reporting companies, including LLCs, corporations, and other entities formed through filing with a secretary of state or a comparable office in the U.S. will be required to submit BOI reports. So, if you are an optometrist who has setup your business as any of the following:

  • Limited Liability Companies (LLC’s)*
  • Limited Partnerships (LP’s)*
  • Limited Liability Partnerships (LLP’s)*
  • General Partnerships+ LLC, PA, S Corp, etc

you generally must file. Sole proprietors generally do not have to file (these entities usually have not filed documents with the state). If in doubt, check with your accountant or attorney.

Who is considered a beneficial owner of a company?

According to the CTA, an individual qualifies as a beneficial owner if they directly or indirectly have a significant ownership stake in a company. This person either has a major influence on the reporting company’s decisions or operations, owns at least 25% of the company’s shares, or has a similar level of control over the company’s equity. The reporting company is responsible for filing the BOI report with Fin Cen NOT each beneficial owner. 

What are the penalties for not reporting?

Civil penalties include a daily $500 fine for a continuing violation, up to a maximum of $10,000.

When are the reporting deadlines?

Companies that are required to comply must file their initial reports by the following deadlines:

  • Existing companies: Reporting companies created or registered to do business in the United States before January 1, 2024 must file by January 1, 2025.
  • Newly created or registered companies: Reporting companies created or registered to do business in the United States in 2024 have 90 calendar days to file after receiving actual or public notice that their company’s creation or registration is effective.

Beneficial ownership information reporting is not an annual requirement. A report only needs to be submitted once, unless the filer needs to update or correct information.

What information must be reported about a company’s beneficial owners?

The details that reporting companies need to include in the BOI report vary based on the date their business was established.

Businesses registered or established post-January 1, 2024, must provide information regarding the business, its beneficial owners, and its company applicants — including owners’ and applicants’ (if applicable) names, addresses, birthdays, and identification numbers (such as a license or passport number), and the jurisdiction of the documents. However, businesses established before that date can omit information regarding company applicants.

All reporting companies must provide their legal name and trademarks, as well as their current U.S. address, which could be either the address of its main business site or, for foreign-based companies, their U.S. operational location. They’ll also need to provide a taxpayer identification number and specify the jurisdiction where they were formed or registered.

What is the beneficial ownership information reporting process?

Filing is simple, secure, and free of charge. Businesses will not incur a fee for submitting their reports, and electronic forms will be available on FinCEN’s website.

Where can business owners get help with their beneficial ownership information reports?

Though companies can file their own BOI reports, if your situation is not straight forward, you might want to get some help.  You don’t want to fill out something incorrectly, so if you are unsure at all, it might be better to have your attorney or accountant file the initial reports to ensure they’re completed on time and to FinCEN’s standards.

As always if you have questions about this topic, feel free to email: info@PracticeComplianceSolutions.com