Corporate Transparency Act: What Business Owners Need to Know

The Corporate Transparency Act (CTA) was enacted in 2021 and went into effect on January 1, 2024 in an attempt to combat illicit activity including tax fraud, money laundering and financing for terrorism by requiring US businesses to provide ownership information.

Under this legislation, businesses that meet certain criteria must submit a Beneficial Ownership Information Report (BOI) to the U.S. Department of Treasury's Financial Crimes Enforcement Network (FInCEN). This report must be submitted by domestic reporting companies, including LLCs, corporations and other entities formed through filing with a secretary of state or any similar office under the law of a state or Tribal jurisdiction. Also, foreign reporting companies that are registered to conduct business in the United States through filing with a secretary of state or an equivalent office must file a BOI.

Some businesses are exempt from the CTA, including sole proprietorships, some general partnerships, foreign entities not registered in the U.S, unincorporated associations, and wealth planning trusts.

All reporting companies are required to provide their legal name and trademarks, as well as their current U.S. address. Foreign-based companies must provide their U.S. operational location as well as their taxpayer identification number and indicate the jurisdiction where they were formed.

Businesses registered or established after January 1, 2024, must provide information regarding the business, its beneficial owners, and its company applicants. This information must include the owners' and applicants' names, addresses, birthdays, and identification numbers (such as a license or passport number), and the jurisdiction of the documents. Businesses established before that date are only required to submit information on the business and beneficial owners.

It is important to understand that the deadline to file a BOI is January 1, 2025. Those who fail to meet this deadline could face up to two years of jail time as well as $591 per day in civil penalties with a maximum $10,000 fine.

The filing deadlines for this new rule are as follows:

Existing entities created/registered before January 1, 2024 - must file by January 1, 2025
New entities created/registered in 2024 - must file within 90 days of either the actual notice of formation or public announcement, whichever comes first.
Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports - must file within 30 days.
New entities created/registered on or after January 1, 2025 - will have 30 days from notification or public announcement of their formation to submit their report.

Business owners can opt to go it alone when filing their BOI. However, many subject matter experts suggest that business owners might find it beneficial to seek the assistance of legal counsel when completing the BOI.

With the holiday season upon us, it is recommended that business owners still needing to file their BOI not wait until the last minute.

About Index Fund Advisors

Index Fund Advisors, Inc. (IFA) is a fee-only advisory and wealth management firm that provides risk-appropriate, returns-optimized, globally-diversified and tax-managed investment strategies with a fiduciary standard of care.

Founded in 1999, IFA is a Registered Investment Adviser with the U.S. Securities and Exchange Commission that provides investment advice to individuals, trusts, corporations, non-profits, and public and private institutions. Based in Irvine, California, IFA manages individual and institutional accounts, including IRA, 401(k), 403(b), profit sharing, pensions, endowments and all other investment accounts. IFA also facilitates IRA rollovers from 401(k)s and 403(b)s.

SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.

About the Author

David York - Director of Financial & Tax Planning

David York is a Financial & Tax Planning Analyst at Index Fund Advisors, Inc. David has more than 6 years of experience in the tax and financial services industry and is a Certified Financial Planner (CFP^®) and Certified Public Accountant (CPA). His prior experience includes tax planning and return preparation as well as developing personalized financial plans for individuals.

David is fascinated with helping individuals and families achieve financial independence. David believes in the power of financial education and empowerment in connection with a holistic financial plan.

David earned his undergraduate degree in Business Administration, Accounting, and a Master of Science in Accounting from the Raymond J. Harbert College of Business at Auburn University. In his free time, he enjoys cycling & playing soccer, cheering on Auburn sports, and board games. He is also an avid traveler and has been to all 7 continents.

*CFP^® (Certified Financial Planner) is a designation received upon passing the course work and exam administered by the Certified Financial Planner Board of Standards, Inc. (CFP Board).

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