By: Danielle Fallon-O'Leary , Contributor
Under the Corporate Transparency Act, U.S. small businesses must file beneficial ownership information reports with the Department of the Treasury. The Corporate Transparency Act (CTA), aimed at combating illicit financial activity, went into effect on January 1, 2024. Under the act, small businesses across the United States need to file beneficial ownership information reports, also known as corporate transparency reports. Here’s everything small business owners need to know about filing a corporate transparency report. [Read More: What Every Small Business Needs to Know About the Corporate Transparency Act] What to know about beneficial ownership information reportingThe CTA was developed to increase transparency in business ownership and curtail the use of anonymous shell corporations for tax fraud, money laundering, and other illegal financial activity. Under this act, all businesses that fall under the definition of a reporting company must file a beneficial ownership information report (BOIR) with the Financial Crimes Enforcement Network (FinCEN). A reporting company is any privately held company, whether domestic or foreign, registered to conduct business in the U.S. Publicly traded companies do not fall under the CTA, as they are subject to their own reporting requirements. A beneficial owner is any individual who owns or controls at least 25% of an organization, or directly or indirectly exercises substantial control in any of the following roles:
Reporting requirements for small businessesEligible small businesses will need to report the following information about their companies:
How to file your corporate transparency reportAs of January 1, 2024, FinCEN has begun accepting beneficial ownership information reports. Here are four steps you can take to prepare your corporate transparency report. 1. Determine whether your business is required to file.Under the CTA, LLCs and corporations must file beneficial ownership information reports unless they qualify for an exemption. The following entities are exempt from reporting:
2. If your business qualifies, learn who the beneficial owners are.List out any individuals who own or control 25% of your company, or otherwise exercise substantial control as defined above. If you are unsure if an individual meets the requirements of a beneficial owner, consult with a legal professional. Once you have identified any beneficial owners, contact each to inform them that the CTA requires your business to report their personal information to FinCEN. Beneficial owners can choose to apply for a FinCEN Identifier and provide information to FinCEN directly. Otherwise, they can send the necessary information directly to you (the company) to be included in your business’s beneficial ownership information report. 3. Create a procedure.Whether your beneficial owners are submitting their information via FinCEN or to your company, establish a process to keep all personal information organized, secure, and current. In addition to your initial report, you will need to file updated reports should there be a change in personal information or beneficial ownership. [Read More: How to Choose the Best Business Entity for Your Small Business] 4. File your report online.All companies required to submit beneficial ownership information reports must file online via FinCEN. You can file one of two ways:
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