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Editor's Note: A December 2024 federal court ruling has temporarily halted the enforcement of the Corporate Transparency Act (CTA), which mandated new reporting requirements for beneficial ownership information (BOI). The CTA was designed to combat financial crimes such as money laundering and terrorism by requiring businesses to disclose information about their owners and applicants. However, a nationwide injunction issued in Texas Top Cop Shop, Inc. v. Garland has left small businesses in a state of limbo. While the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) continues to assert the law’s constitutionality, businesses are no longer required to file BOI reports during the injunction—though voluntary submissions are still accepted.
Here’s what you need to know about the ruling, its implications, and the reporting requirements should they resume in the future.
What small business owners need to know
While most small business owners will simply report themselves and their partners as beneficial owners, companies that have more complex ownership systems may find the reporting more time-consuming. All domestic and foreign entities operating in the U.S. are required to report beneficial ownership information to FinCEN. The criteria for reporting include having substantial control over the company or owning at least 25% of the business's ownership interests. Bench has partnered up with FileForms, a BOI-filing service that helps users avoid the government's self-filing portal entirely as it reports directly to FinCEN on your behalf, the right way. FileForm offers annual plans for entities in the midst of change as well as simple and complex ownership structures.
Understanding Beneficial Ownership and Company Applicants
Beneficial Owners (BOs) are individuals or legal entities with at least a 25% stake in the company or significant control over its decisions. FinCEN requires that every company report at least one BO, though more can be included if they meet the criteria.
Company Applicants (CAs) refer to the individuals who file the paperwork to create or register the company. This requirement only applies to companies formed or registered after Jan. 1, 2024. Unlike BOs, CAs can only be individuals. If a company has more than one CA—the direct filer and the indirect filer who is controlling or directing the filing must both be reported. Unlike a beneficial owner, company applicants can only be individuals, not legal entities.
To determine who qualifies as a BO, FinCEN provides a flowchart for businesses with complex ownership structures.
Compliance requires electronic filing of beneficial ownership information through FinCEN's secure portal. FinCEN offers comprehensive instructions and technical guidance on its website to aid in the reporting process.
How to report beneficial owners and company applicants
Companies are to file their information electronically through the FinCEN secure portal. The agency has published instructions and technical guidance on reporting on their website at fincen.gov/boi.
Businesses should prepare by:
Step 1: Identify individuals with substantial control over your company and/or 25% or greater owners.
Step 2: Identify the types of ownership interest (percentage or control), and which individuals hold them.
Step 3: Calculate the percentage of ownership interest held directly or indirectly by each individual.
A FinCEN unique identifying number can be applied for and used in place of the ID information above. A FinCEN identifier is a unique number assigned to individuals or companies upon request, after submitting specific information to FinCEN. This identifier is unique, meaning you or your company can only have one.
Business owners will need to report the following information:
For their company:
- Full legal name
- Trade name or DBA name
- Current U.S. address for principal place of business
- State or jurisdiction where entity is registered
- Federal Tax ID number TIN, or Employer ID number EIN
For their beneficial owners and company applicants:
- Full legal name
- Date of birth
- Current residential address
- Unique ID number and issuing state, and image of U.S. passport, state driver’s license, other state or government issued ID
Business owners are advised to proactively gather the necessary information and familiarize themselves with the reporting process to ensure compliance and contribute to this broader effort of enhancing financial security.
Simplify The Process With FileForms
If this process seems overwhelming, you’re not alone, and there are simpler alternatives to handling it yourself.
Bench partner FileForms offers a streamlined solution that removes the complexities of the reporting process. For a nominal fee, typically just a few hundred dollars, FileForms can help you comply with these regulations efficiently. Their service enables companies to file their BOI reports directly to FinCEN in about 10 minutes — a significant time saver that also mitigates the risk of non-compliance penalties.
Key Reporting Deadlines
For businesses operational before 2024, the first BOI report must be submitted by Jan. 1, 2025. Businesses established in 2024 have 90 days from registration to comply, while those starting from Jan. 1, 2025, face a 30-day deadline.
Failure to Comply
FinCEN emphasizes awareness around the obligation to report, update, and correct BOI in a timely manner. Failure to comply with these reporting requirements can lead to severe penalties, including daily fines and imprisonment. FinCEN emphasizes the need for accurate and timely reporting and provides a 90-day grace period for corrections to avoid penalties.
Simplify the Process and Outsource
You don't need to hire a lawyer or a CPA to report beneficial ownership information. FinCEN allows for self-reporting, making the process more direct and potentially cost-effective. However, professional assistance is available if you find you need it. Bench's partner FileForms allows companies to file their BOI reports directly to FinCEN within 10 minutes, so you don't have to worry about penalties or fines.
Click here for a complete list of FAQs prepared by FileForms.
