The rules for most domestic businesses have undergone a major change that business owners can’t afford to ignore. Effective January 1st, 2024, the Corporate Transparency Act now mandates that alongside state filings and article approvals, most businesses will require registration with the federal government through a Beneficial Ownership Information (BOI) report.
This blog post aims to break down the complexities of this new requirement, its implications for existing and new domestic businesses, and what steps business owners need to take to ensure compliance.
Understanding the Corporate Transparency Act
The Corporate Transparency Act was signed into law in 2021, with the primary goal of combating money laundering activities conducted through corporate structures. The federal government, particularly the Financial Crimes Enforcement Network, seeks greater transparency to unveil hidden ownership structures used by criminals. While the law introduces a new layer of compliance, it is crucial for business owners to grasp the intricacies to avoid penalties.
Key Filing Requirements and Timelines
The heart of the compliance process lies in filing the BOI report with FinCEN. This report necessitates disclosure of individuals with a 25% or more ownership stake or substantial control over the entity. For LLCs, this typically includes managers. While for corporations, it may involve presidents, CEOs, or influential board members. The disclosure includes personal information such as name, address, date of birth, and a valid government-issued ID.
The filing period opens on January 1st, 2024, and businesses have until December 31st, 2024, to complete the process. While there is no fee associated with filing, the process can be intricate, especially when including government-issued IDs.
Exceptions and Exemptions
The law provides some exceptions, but two significant exemptions apply to regular business owners. The first is the inactive entity exception, where entities established before January 1st, 2020, with no recent activity, are exempt. The second is the large entity exemption, sparing businesses with over five million in gross revenue or more than 20 employees on payroll from filing.
Navigating Changes for Existing and New Entities
Existing LLCs and corporations have a grace period until the end of 2024 to comply with the BOI requirement. However, it’s also an opportune time for business owners to assess the necessity of keeping dormant entities and potentially dissolve them to avoid compliance.
For entities set up on or after January 1st, 2024, the BOI filing is a mandatory second step after state approval. The timeline for filing has been extended to 90 days after receiving state approval to accommodate the practical challenges of the process.
Seeking Assistance for Compliance
Given the intricacies and potential challenges of the new compliance requirement, many business owners are turning to professional services for assistance. Companies like Main Street Business Services are offering comprehensive compliance services, ensuring the timely and accurate submission of BOI reports along with other maintenance tasks.
In conclusion, the Corporate Transparency Act introduces a pivotal change in the compliance landscape for LLCs and corporations. Business owners need to be proactive in understanding the requirements, seeking professional assistance if needed, and ensuring timely compliance to avoid penalties and disruptions to essential services like banking.
As the January 1st, 2024 deadline approaches, staying informed and taking the necessary steps is paramount for a smooth transition into this new era of corporate transparency.
If you have questions, contact Paragon today!
To file online go to this LINK
