Take Action Now to Avoid the CTA’s $500/Day Penalty
The Corporate Transparency Act (CTA) became a federal law on January 1, 2022. The effective date of the CTA law administered by the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Treasury is January 1, 2024. The CTA requires almost all entities formed in the U.S. and almost all entities formed outside the U.S. that do business in the U.S. to file a FinCEN Beneficial Owner Information report with FinCen or be subject to a $500/day late report fine. Companies that must file a FinCEN BOI report are called reporting companies.
The report must disclose information about each of the entities’ beneficial owners. If the reporting company is formed after 2023 the reporting company’s FinCEN BOI report must also contain the required information about the reporting company’s applicant(s). An applicant is the individual who files the document with a state or Indian Tribe that created the reporting company.
Now is the time for managers and people in charge of reporting companies to file their reporting company’s FinCEN BOI report. Reporting companies that do not file a timely and complete FinCEN BOI report that discloses the company’s required information about its beneficial owners may be fined $500/day from the due date of the report until the complete report is filed.
Report Due Dates
Reporting companies created or registered before January 1, 2024, have until December 31, 2024, to file their FinCEN BOI report. Reporting companies created or registered in 2024 have 90 days after the company was formed or registered to file the company’s FinCEN BOI report. Reporting companies created or registered after 2024 have 30 days after the company was formed or registered to file the company’s FinCEN BOI report.
If any information in a filed report changes or information in a filed report contains inaccurate information the reporting company has 30 days to file an amended FinCEN BOI report.
Here’s our list of important actions reporting companies should take immediately to satisfy their CTA reporting obligation to collect and report information about the reporting company, its beneficial owners and its applicant(s) (if the reporting company was formed after 2023):
- Subscribe to a free CTA newsletter to keep up to date on the CTA, its regulations and other important issues related to the CTA.
- Determine if you are involved with a reporting company. Almost all companies that operate small businesses or own real estate are reporting companies regardless of when the company was created. If you own multiple companies, each company may be a reporting company that needs to file a FinCEN BOI report. If you are not involved with any reporting companies then you don’t need to read beyond this point or pay any attention to the CTA unless and until you become involved with a reporting company. If you have friends who may be involved with their own reporting companies do them a favor and send them a link to this website.
- Identify all of the beneficial owners of the reporting company and notify them as to the existence of the CTA and the requirement that the reporting company disclose to FinCEN the following required information about each beneficial owner:
a) The full legal name of the beneficial owner;
b) The beneficial owner’s birth date;
c) The current residential address of the beneficial owner;
d) A unique identifying number (i.e., non-expired passport issued by the U.S., non-expired personal identification card, or non-expired driver’s license issued by a state) or FinCEN Identifier issued to the beneficial owner; and
e) A picture of the beneficial owner’s non-expired driver’s license, passport, id card or nonexpired passport issued by a foreign government from which the unique identifying number was obtained.
- The reporting company must collect the required information from all beneficial owners. The best way to collect the required information is to buy our Corporate Transparency Act Affidavit and have each beneficial owner complete and sign the affidavit in front of a notary and return the signed and notarized affidavit to the reporting company. This affidavit asks the signer to input the required information and attach a copy of the signer’s driver’s license, passport or other identification document as an exhibit. You can use this affidavit for multiple beneficial owners and applicants of multiple reporting companies.
Warning: The reporting company should not rely on oral statements, unsigned documents, text messages or emails to collect information from beneficial owners. Nor should it allow anybody other than the beneficial owner to supply the beneficial owner’s information. If the beneficial owner or another person submits incorrect information the reporting company must be able to prove that the incorrect information in the FinCEN BOI report was information given to the reporting company by the beneficial owner. Our LLC Operating Agreements contain language that requires a beneficial owner who submits incorrect information to indemnify the reporting company for any fines imposed on the reporting company due to bad information submitted by a beneficial owner. The reasons stated in this paragraph are reasons why you should have beneficial owners submit their information using our Corporate Transparency Act Affidavit which must be signed and notarized.
- The reporting company needs to collect and report the following information about the reporting company to FinCEN:
a) its legal name
b) any alternative names through which the company is engaging in business (d/b/a names or trade names),
c) its business street address,
d) its jurisdiction of formation, and
e) a unique identification number such as an EIN, TIN or FinCEN identifier (a number issued to an entity by FinCEN) .
- Reporting companies created or registered to do business after 2023 must also identify the individual (the “applicant“) who filed the document with the government that created the entity or registered it to do business, as well as the individual (also an “applicant“) who was primarily responsible for directing or controlling the filing if more than one individual was involved in the filing of the document. The reporting company must contact the applicant “and get the applicant’s required information. The information about the applicant that the reporting company must disclose in its report to FinCEN is the same as the beneficial owners required information. We provide the applicant’s required information for all companies we form.
- If the reporting company is a limited liability company it should cause the members to become obligated to deliver to the company before the FinCEN BOI report filing deadline all of the required information. This should be done by adding language to the LLC’s Operating Agreement that notifies the members of the CTA required information, obligates them to provide the information by a specific date and fines them for failing to deliver all of the required information by the company’s deadline. If you have an LLC, you should purchase our CTA Operating Agreement Amendment in Word format that you can insert into your company’s Operating Agreement or have the members sign it as a separate amendment to its Operating Agreement.
- If the reporting company is a corporation you should try to get all of the beneficial owners to sign a Stockholders’ Agreement that obligates them to deliver all of the required information to the corporation before the FinCEN BOI report filing deadline.
- File the required information with FinCEN.
Hire FinCEN Filer, LLC, to Prepare & File a FinCEN Report
The following is a description of the FinCEN BOI report services FinCEN Filer, LLC provides when hired to prepare and file a FinCEN report.
FinCEN Filer works with a person designated by the reporting company as its liaison (the “Contact”). FinCEN Filer provides the following services.
- FinCEN Filer helps the Contact determine the reporting company’s beneficial owners.
- FinCEN Filer gives the Contact a link to FinCEN Filer’s online questionnaire that collects the reporting company’s information the the applicant’s information (if the entity was formed after 2023). When the Contact submits the questionnaire FinCEN Filer’s system sends an email to the Contact and to FinCEN Filer that has all of the information submitted by the Contact.
- FinCEN Filer gives the Contact access to an online questionnaire the Contact should send to each beneficial owner to collect the beneficial owner’s information. The Contact will copy the text we supply and paste the text in an email the Contact sends to each beneficial owner. This text explains the CTA and asks the beneficial owner to go to the link in the email and submit the beneficial owner’s information into FinCEN Filer’s online questionnaire. The questionnaire collects the required information about a beneficial owner. When the beneficial owner submits the questionnaire FinCEN Filer’s system sends an email message that contains the beneficial owner’s information to the beneficial owner who submitted the questionnaire, to the Contact and to FinCEN Filer.
- FinCEN Filer will send an email to each beneficial owner that has the beneficial owner’s information in a document attached to the email as a pdf file. The transmittal email asks the beneficial owner to review the document, digitally sign the document and represent that all information in the document is correct. The reporting company must confirm that the beneficial owner’s information is correct because if the information is not correct the reporting company can be fined $500/day.
- If any beneficial owner has a FinCEN identifier we will send an email to each beneficial owner that has the beneficial owner’s FinCEN identifier in the document attached to the email as a pdf file. The transmittal email asks the beneficial owner to review the FinCEN identifier, digitally sign the document and represent that the FinCEN identifier in the document is correct.
- FinCEN Filer will prepare the proposed FinCEN report and send it to the Contact as a document attached to an email as a pdf file. The email will ask the Contact to review the proposed report and if all the information is correct to digitally sign the document. The email will also say if any information is incorrect the Contact should reply to the email message and give the correct information.
- If changes to the proposed report are needed, FinCEN Filer will revised the proposed FinCEN report and resend it to the Contact for approval.
- When the Contact approves the proposed FinCEN report FinCEN Filer will file the report with FinCEN.
- FinCEN Filer will send the Contact a copy of the filed FinCEN report.