The U.S. Corporate Transparency Act

For businesses navigating the Corporate Transparency Act, compliance is crucial to avoid penalties and ensure they are operating within the bounds of U.S. law. This is where partnering with a trusted service provider like International Business Company Formation, Inc. (IBCF) becomes invaluable. At IBCF, we specialize in helping businesses of all sizes meet their compliance obligations under the CTA. Our team of experts understands the complexities of the new reporting requirements and can guide you through the process, from gathering the necessary documentation to submitting reports to FinCEN on time.

Certain entities, such as publicly traded companies, banks, and other heavily regulated organizations, are exempt from the CTA reporting requirements. However, most small to mid-sized businesses, including LLCs, corporations, and limited partnerships, are required to file reports. The CTA requires certain U.S. businesses, including both domestic and foreign entities registered to do business in the U.S., to disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Department of Treasury. A “beneficial owner” refers to any individual who directly or indirectly owns or controls 25% or more of a company, or who exercises substantial control over it

The reporting requirements under the Corporate Transparency Act are significant. Companies subject to the CTA must submit a report to FinCEN that includes identifying information for each beneficial owner, such as their full legal name, date of birth, residential address, and an acceptable identification number (such as a passport or driver’s license number). These reports must be filed at the time of incorporation or registration (within 90 calendar days) and updated whenever there is a change in beneficial ownership. Failure to comply with these reporting requirements can result in significant penalties, including fines and even imprisonment in cases of willful non-compliance. Entities formed before January 1, 2024 have until December 31st to file their initial BOI report.

As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. However, this civil penalty amount is adjusted annually for inflation. As of the time of this publication, this amount is now $591.

A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.

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