What U.S. Freelancers Should Know About the Corporate Transparency Act
Editor's note: This guest post by RN2writer member Terry Ann Donner contains valuable, time-sensitive information about a new U.S. federal law that applies to most freelance writers whose business entity is an LLC. Many thanks to Terry for authoring this guest post for our benefit! ~Beth
What U.S. Freelancers Should Know About the Corporate Transparency Act
by Terry Ann Donner, RN, JD, CCM, CSA
Many freelancers or other small business owners may not be aware that the Corporate Transparency Act (“CTA”) requires the reporting of certain business ownership information to the federal government before December 31, 2024. Failure to comply with these new reporting requirements could result in civil money penalties of up to $500 for each day of non-compliance or criminal penalties if there is a finding of willful non-compliance.
What is the Corporate Transparency Act
Enacted in 2021, the CTA (§§ 6401-6403 of the National Defense Authorization Act) was created to prevent businesses from being used as a cover for criminal activities, such as money laundering, tax evasion and the financing of terrorism.
Companies must report their Beneficial Ownership Information (“BOI”) to the United States Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”).
FinCEN is creating a database of individuals or certain trusts that hold beneficial interests in businesses in each state so owners can be identified. It is hoped that this information will aid law enforcement in tracking criminal activity.
Who is Considered a Company’s Beneficial Owner
A beneficial owner is an individual who fits in one of the following categories:
- Has substantial control over the company
- Controls or owns 25 percent or more of the company
This ownership or controlling interest can be indirect or direct. Trusts can also be considered Beneficial Owners in some circumstances.
What Must Be Reported
The information that must be reported about your company and the individual(s) or trust(s) that have a beneficial ownership interest in your company, includes:
Company Information
- Legal name of your company
- Any trade name
- Street address of the company’s principal place of business
- State where the business was formed
- Taxpayer Identification Number (“TIN”)/Employer Identification Number (“EIN”)
Beneficial Owner Information
- Individual’s full legal name
- Date of Birth
- Current residential address
- Unique identifying number from a passport, driver’s license or state ID
- Image of the individual’s passport, driver’s license or state ID
For companies formed in 2024 or after, the person who filed the documentation that registered or created the company (“Company Applicant”) must also file the following information:
- Full legal name of the individual that filed the business documentation
- Date of birth
- Current residential street address (or business street address)
- Unique identifying number from a passport, driver’s license or state ID
- Image of the individual’s passport, driver’s license or state ID
Who is Exempt from filing a Beneficial Ownership Interest Report (“BOIR”)?
There are 23 types of companies that are excluded from reporting, including:
- Non-profit organizations
- Certain large operating companies
- An inactive entity that is not engaged in any active business and was formed on or before January 1, 2020, is not owned by a foreign person, has had no ownership changes in the prior year, has not exchanged over $1,000 in funds directly or indirectly in the last year and does not own any assets in or outside the United States, including any ownership interest in another company
- A company that has filed a federal tax return within the last year showing at least $5 million in gross receipts or sales
- Banks
- Investment companies or advisors
When must non-exempt companies report ownership information
Non-exempt companies formed prior to December 31, 2023, must file with FinCEN before January 1, 2025.
Any company that is not exempt and is formed in 2024 through a filing with the secretary of state or similar office, must file a BOIR within 90 days after the creation of the company.
Non-exempt companies that will be formed in 2025 must file a BOIR within 90 days of creation.
Are there any ongoing reporting requirements after the initial report is made?
Ownership information must be updated within 30 days of any change in any information that has been filed, such as change in ownership or change in address.
Penalties for failing to file information
There are two types of penalties that may be imposed for failure to comply with reporting requirements.
- Civil Penalties. Civil fines up to $500 per day (with no limit on the amount that can be incurred) for failure to report or for reporting incorrect or incomplete information
- Criminal Penalties. If there is a finding that a company willfully failed to comply with reporting requirements or the failure to report is accompanied by an intent to defraud, then there can be a $10,000 fine and imprisonment for up to 2 years.
- If the failure to report occurred by breaking any other laws or as part of a pattern of illegal activity, then the fines can be up to $500,000 with up to 10 years in prison.
How Do I File
If you must report your company’s BOI to the Department of Treasury’s FinCEN, you can do so electronically via the BOI E-Filing website at (https://boiefiling.fincen.gov/). Be sure you have available the information required about your company, any Beneficial Owner and, if applicable, the Company Applicant.
You can also secure the assistance of your legal advisor or a reputable private company that has been created to handle these filings for a fee.
Nothing in this article is intended to be legal advice. Please contact your legal advisor if you have any questions regarding your compliance with CTA.
Terry Ann Donner RN, JD, CCM, CSA is a nurse, attorney, and freelance writer who specializes in covering Alzheimer's, dementia, and end-of-life care for consumer and business audiences. Find her at Donner Health Communications LLC.
