The Corporate Transparency Act (CTA) took effect on January 1, 2024. Entities formed prior to January 1, 2024, are required to file a beneficial owner information (BOI) report to the Financial Crimes Enforcement Agency (FINCEN) by January 1, 2025.  If the entity is created or registered to do business after January 1, 2024, the initial report is due within 90 days after formation. 

Per FINCEN, less than 1 in 8 entities have filed as of the end of September.  They predict that 32 million existing businesses and 5 million new entities will be required to file. Failure to file is a felony with stiff financial penalties. At this point, there is a real possibility millions of business owners will fail to file and could be subject to penalties.

The FINCEN has published a number of Frequently Asked Questions, which summarize the penalties as follows:

What penalties do individuals face for violating BOI reporting requirements?

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 publication of this FAQ, this amount is $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.

Throughout 2024, there have been multiple legal challenges to the CTA and the BOI filing requirement, one of which originated in Alabama (National Small Business v. Yellen). These challenges assert the CTA is unconstitutional. In addition, there are also legislative challenges in the House and Senate, including proposed legislation to delay the filing requirements.  As of the end of October, none of these challenges have resulted in a national delay or removal of the filing requirement.

We’ve talked to numerous business owners waiting to file under the assumption that the filing requirement may be deferred or eliminated altogether. With the January 1 deadline approaching, we recommend reconsidering.  For a less complex entity, it may only take 5-10 minutes to file the BOI report.  If you have a complex structure, multiple entities, or multiple beneficial owners, it could take more time to determine if filing is required and which individuals need to be included as beneficial owners. 

Keep in mind that it’s also very likely if everyone waits until the last few days, the FINCEN website may not handle the traffic.

Click this link to read our original post from January 2024.

Click this link to read our updated post from September 2024, which includes several links to relevant BOI resources and the website to file the BOI report.