By Kelvin Lee, Alonso Munoz
Back in 2021, congress passed the Corporate Transparency Act (CTA) as a response to concerns about money laundering and shell companies. As part of the act, and effective this year on January 1, 2024, is a new reporting requirement for Beneficial Ownership Information (BOI) reports to be filed with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury. In essence, the CTA aims to make business ownership more transparent, and to do this will require another bureaucratic form, on top of the hundred others that business owners already have to fill out. But alas, it does need to be filled out, so below is a brief guide (not legal advice) on how to do it. Here’s the full guide too.
Who Needs to Report:
Any company considered a “reporting company” which includes corporations, nonprofits, limited liability companies, limited partnerships, business trusts, and entities created filing with a secretary of state. There are some exemptions (which you can find here), but in general, public companies, banks and tax-exempt entities don’t need to file the form since they’re regulated by federal agencies.
What Information Needs to be Reported:
FinCEN wants details about “Beneficial Owners”, which are individuals who have significant control over the business or own at least 25% of it. On the form (which you can find here), you’ll need to report the following about these Beneficial Owners:
– Full legal name
– Date of birth
– Residential (or sometimes business) physical commercial street address
– An image of an acceptable government-issued ID (e.g., a U.S. passport or state-issued driver’s license)
When to Report:
Companies existing before Jan. 1, 2024, have until Jan. 1, 2025, to file. New companies must report within 90 days of creation (in 2024) or 30 days if formed after Jan. 1, 2025.
And if I don’t report?
Surprise, surprise, charges and penalties. Non-compliance can result in fines up to $10,000 per violation and possible imprisonment. Failure to report updated beneficial ownership information to FinCEN or attempting to provide false or fraudulent beneficial ownership information include civil penalties of up to $500 for each day and imprisonment for up to two years.
Overall, this is a simple form that can be filed online to FinCEN (BOI E-FILING (fincen.gov)). It’s another administrative burden and it’s easy to miss. Don’t let it slip through the cracks. There’s no “street cred” in prison for not filing a BOI report.
To contact the author of this story:
Kelvin Lee at kelvin@hamiltoncapllc.com
To contact the editor responsible for this story:
Alonso Munoz at alonso@hamiltoncapllc.com
This commentary reflects the personal opinions, viewpoints and analyses of the Hamilton Capital Partners, LLC, a registered investment advisor, employees providing such comments, and should not be regarded as a description of advisory services provided by Hamilton Capital Partners, LLC or performance returns of any Hamilton Capital Partners, LLC client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Hamilton Capital Partners, LLC manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
