As of January 1st, 2024, the federal government now requires every company to report and disclose the owners of their entity, including, any and all individuals who have “substantial control” over the operations of the business.
This new law, which is known as the “Corporate Transparency Act” (“CTA”) mandates that small businesses submit a Beneficial Ownership Information (“BOI”) report with the U.S Department of Treasury’s Financial Crimes Enforcement Network (FinCen). The purpose of this new reporting mandate is to address and counter the various types of financial fraud by establishing an extensive database containing information about beneficial owners.
If you own or are in control of a business, you will be required to act. Below is a brief overview of the CTA and how it may impact you and your business.
Who is Required to Report?
Businesses that qualify for required reporting fall under two categories: domestic reporting companies and foreign reporting companies (collectively referred to as “Reporting Company”).
Domestic Reporting Companies: Corporations, limited liability companies, and similar entities based on the United States.
Foreign Reporting Companies: Entities formed under foreign law that are registered to do business in the United States.
Who is a Beneficial Owner?
Any company which falls under the two categories mentioned above is required to submit a report of their “beneficial owners”. A “beneficial owner” is any individual who either (1) exercises substantial control over a reporting company, or (2) possesses at least 25% ownership interests in the entity. This includes senior officers, equity owners, stockholders, or individuals who hold voting rights in the company.
When Do I Need to File?
- Any Reporting Company created before January 1, 2024, must file its initial BOI report by January 1, 2025.
- A Reporting Company created on or after January 1, 2024, and before January 1, 2025, must file a report within 90 calendar days of the date on which it receives actual or public notice that its creation has become effective.
- A Reporting Company created on or after January 1, 2025, must file a report within 30 calendar days of the date on which it receives actual or public notice that its creation has become effective.
What if I Fail to Report?
There are civil and criminal penalties for failing to file a BOI report. Those who fail to report by the required deadline can face a fine of $500 a day, up to a maximum of $10,000.
Can Daudi & Kroll, P.C, Help?
Yes, our team is happy to help. We are capable of filing the necessary paperwork on your behalf. If you would like our assistance in meeting these new CTA guidelines, or have any further questions on the reporting requirements, please feel free to call our office at (734)-351-5578.
Adil Daudi, a Partner at Daudi & Kroll, P.C., specializes in intricate Corporate Transactions, including buy/sell agreements, real estate transactions, and corporate restructuring strategies. He brings an extensive background in negotiating complex deals and ensuring legal compliance in corporate environments. Additionally, Adil offers comprehensive Estate Planning services, tailoring solutions to safeguard assets and facilitate smooth succession plans for individuals and families, including Shariah-compliant Estate Planning. For legal assistance in corporate matters or estate planning needs, Adil can be reached at adil@daudikroll.com or (734)-351-5578.