File or Be Fined: New Law Requires Many Business Owners to File a Report with the Treasury Department’s Financial Crimes Network

Are you a business owner or involved in corporate management? If so, you need to be aware of the critical changes brought by the Corporate Transparency Act. This new legislation has introduced mandatory Beneficial Ownership Reports, and non-compliance could lead to severe criminal and civil penalties.

Businesses established or registered before January 1, 2024, must file their initial BOI report by January 1, 2025.

Companies formed or registered between January 1, 2024, and January 1, 2015, have 90 days post-notification of their creation or registration to file their initial BOI report. This deadline starts from when the company is officially notified or when public notice is first given, whichever comes first.

Entities created or registered on or after January 1, 2025, have 30 days from notification of their establishment or registration to submit their initial BOI reports to FinCEN.

In summary, all existing and new corporations, LLCs, limited partnerships, and similar entities filing formation papers with a state's Secretary of State or equivalent must report to the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN), providing details about their beneficial owners.

This federal initiative aims to combat money laundering and tax evasion by identifying the real owners behind shell companies. Most businesses will face burdensome reporting obligations, and failure to comply can lead to fines of up to $500 per day or, in criminal cases, fines up to $10,000 and/or two years in prison. These penalties apply to beneficial owners, the entity, and report filers.

Beneficial owners include those with over 25% ownership interest or substantial control over the company, even without ownership stakes. This could affect senior officers and individuals involved in significant business decisions. Given the high fines, it's advisable to over-report rather than under-report.

For entities formed post-2023, details about the company applicants (those filing the formation/registration documents) must also be provided.

Required information for beneficial owners includes legal name, residential address, date of birth, and a unique identifier number from a valid passport, driver's license, or state ID. Entities must also submit a copy of these documents for all beneficial owners to FinCEN.

Should any reported information change or ownership interests be sold or transferred, the entity must update this within 30 days to avoid penalties. Changes include updates to a beneficial owner's address or name, new passport numbers, or renewed driver's licenses.