Update: New Benefical Ownership Reporting Requirements

Please note: There is a temporary halt to the enforcement of the Corporate Transparency Act (CTA). This means businesses are not required to file their BOI while the halt is in place. Businesses are still encouraged to file because this halt could be lifted without a grace period and could result in your business being fined up to $591/day.

Effective January 1, 2025, the Corporate Transparency Act (CTA) mandates that many businesses in the United States report specific information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). This initiative aims to enhance corporate transparency and combat illicit financial activities.

Businesses registered before January 2024 must file by January 1, 2025. Newly established businesses are required to file within 30 to 90 days of obtaining their business license.

Who Must File?

The CTA’s reporting requirements apply to:

• Domestic Reporting Companies: Entities created by filing with a secretary of state or similar office.
• Foreign Reporting Companies: Entities registered to do business within the U.S.
• Exempt Entities: Certain organizations, including banks and nonprofit organizations, are exempt from these requirements.

Small business owners should assess their status to determine if they are subject to these new obligations. However, keep in mind that most small businesses will need to file.

Defining a Beneficial Owner

A beneficial owner is any individual who:

• Directly or indirectly owns 25% or more of the company, or
• Exercises substantial control over the company, such as senior officers or key decision-makers.

Information to Be Reported

Companies are required to report the following details:

• For the Company:
  • Legal name and any trade names (“Doing Business As” or DBA)
  • U.S. business address
  • State or jurisdiction of formation
  • Taxpayer Identification Number (TIN) or Employer Identification Number (EIN)
• For Each Beneficial Owner:
  • Full legal name
  • Date of birth
  • Residential address
  • Unique identifying number from an acceptable identification document (e.g., state-issued ID or passport)

Additionally, for entities formed after January 1, 2024, information about the “Company Applicant”—the individual who filed the formation documents—must also be reported.

Filing Process

Filings must be submitted online through the FinCEN website. Key points include:

• The filing process is straightforward, typically taking about 20 minutes.
• There is no fee for filing directly through FinCEN.
• This is a one-time filing unless there are changes to the reported information.
• Businesses should retain a copy of their submission for their records.

To facilitate the process, businesses can obtain a FinCEN Identifier (ID)—a unique 12-digit number assigned to the entity or individual. This ID simplifies future updates, such as changes in address or ownership.

Penalties for Non-Compliance

Non-compliance with these requirements can result in significant civil or criminal penalties. Penalties may be imposed for:

• Willful failure to file the required information
• Knowingly submitting false or fraudulent information

The penalties for BOI reporting violations and for the unauthorized disclosure or use of BOI are each increased to $591 a day from $500, effective Jan. 25.

Resources for Business Owners

To assist our members in understanding and complying with the CTA, we recommend utilizing the resources available on the FinCEN Small Business Resources page. This page offers comprehensive guidance, including:

• Small Entity Compliance Guide: A detailed manual to help small businesses navigate the reporting requirements.
• Frequently Asked Questions (FAQs): Answers to common questions regarding the CTA and its implementation.
• Quick Reference Materials: Summaries and checklists to aid in compliance efforts.
• Introductory Video: A brief overview explaining the importance and process of beneficial ownership reporting.

For assistance, contact the Chamber office at (360) 426-2021 or email info@masonchamber.com. We are committed to supporting your business through these regulatory changes and ensuring a smooth compliance process.

The Financial Crimes Enforcement Network (FinCEN) can be reached here.