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Update (December 5, 2024)
A recent federal court ruling has temporarily halted the enforcement of the Corporate Transparency Act (CTA) and its Beneficial Ownership Information (BOI) report requirements. On December 3, 2024, U.S. District Judge Amos Mazzant in Texas issued a nationwide preliminary injunction, deeming the CTA likely unconstitutional.
As a result, the January 1, 2025, BOI report deadline is currently suspended pending further legal proceedings. Businesses should stay informed about ongoing developments to ensure compliance once a final decision is reached.
Original Post
The clock is ticking for small businesses to comply with a key regulation under the Corporate Transparency Act (CTA): the Beneficial Ownership Information (BOI) report. Many companies remain unaware of the upcoming deadline or its significance.
Issued by the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), the BOI report mandates millions of smaller businesses to disclose detailed ownership information. This reporting aims to combat financial crimes like money laundering and fraud, but the consequences for noncompliance—including hefty fines and criminal penalties—make understanding and meeting these requirements critical.
FinCEN designed the federal law to expose obscured shell entities and corporate ownership frameworks that could facilitate financial crimes. Entities with fewer than 20 employees founded in the United States before January 1, 2024, must comply with CTA reporting requirements by January 1, 2025, or face costly consequences.
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Businesses with fewer than 20 employees must submit comprehensive ownership details, including:
There is no annual reporting requirement. Companies file the BOI report once and then only need to update their information when ownership changes occur. The online beneficial ownership information reporting tool streamlines the submission process.
Existing businesses founded before January 1, 2024, have until January 1, 2025, to file their initial BOI reports.
Companies established in 2024 must file within 90 days of registration. The deadline will get even tighter going forward: Starting in 2025, the filing window for new companies will be reduced to 30 days.
More than 20 exemptions can exclude a business from the CTA BOI reporting requirements, including qualifying as a “large operating company.”
A large operating company must satisfy all the requirements below for this exemption:
Businesses also are exempt if they already report to regulatory bodies such as:
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Failure to comply with the Corporate Transparency Act can result in significant penalties, including:
The act is part of broader international efforts to increase financial transparency and curb money laundering. Similar legislation, including the European Union’s Anti-Money Laundering Directives, has been implemented in other countries, signaling a global trend toward more rigorous corporate reporting standards.
FinCEN’s primary goal is combating criminal networks and the potential national security risks they present. The agency emphasizes that its focus is identifying systemic financial threats, not penalizing small business owners for administrative oversights.
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Given the fast-approaching BOI reporting deadline and potentially costly penalties for noncompliance, small business owners should:
Axcet HR Solutions is a Kansas City-based, IRS-certified professional employer organization (PEO) with decades of experience supporting small and mid-sized businesses. Our team specializes in compliance, payroll, HR and risk management, providing trusted expertise to help businesses navigate challenges like the Corporate Transparency Act.
Schedule a consultation today to discover how Axcet can help your business thrive while staying compliant with critical regulations.
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