Category: CTA Basics

In the evolving landscape of financial compliance, staying updated with the latest regulations and requirements is crucial. The Corporate Transparency Act (CTA) and FinCEN’s Beneficial Ownership Information (BOI) reporting are no exceptions. 

As new FAQs become available, they provide invaluable insights that can help businesses navigate these complex waters more effectively.

Understanding FinCEN FAQs: Why They Matter

FinCEN’s FAQ page (Frequently Asked Questions) is a reliable resource that clarifies regulatory requirements, addresses common concerns, and provides practical guidance. FinCEN does not update its FAQs on a particular schedule, but whenever they do, the added information always contains interpretations and best practices related to BOI reporting. 

For reporting companies, these updates are not just informational but also instrumental in ensuring compliance and avoiding penalties.

Key Insights from Recent FAQs

1. Clarifying Reporting Obligations: The FAQs shed light on which entities are required to report their BOI, including detailed explanations about exemptions and specific scenarios that determine whether an entity must file. Understanding the foundations of the reporting regulation is critical for accurate reporting.
2. Detailed Reporting Requirements: FAQs break down the specifics of what needs to be reported. This includes the type of information required, how to gather it, and the formats in which it should be submitted. Detailed guidance on beneficial owners, control persons, and the information that must be disclosed helps businesses ensure they are collecting and reporting the right data.
3. Handling Dissolved Entities: One of the recent FAQs addressed how to handle entities that are fully dissolved. The FAQ clarified that entities not fully dissolved – irrevocably and permanently – may still have reporting obligations, depending on their state laws and activities. This guidance is crucial for businesses that were wrapped-up in 2024.
4. BOI Database Security and Access: Ensuring the security and confidentiality of reported information is a top concern for the government. The FAQs explain which authorized users will be able to access the BOI database and provide best practices for protecting any sensitive data distributed from FinCEN, including encryption, access controls, and meeting requirements.
5. Penalties and Enforcement: Understanding the consequences of non-compliance is essential for all involved in the CTA reporting process. FinCEN FAQs detail the penalties for failing to report or providing inaccurate information. This includes fines, legal actions, and other enforcement measures. Awareness of these penalties underscores the importance of diligent compliance efforts.

How to Stay Updated!

Given the dynamic nature of regulatory requirements, it’s important for businesses to stay informed about the latest FAQs and updates from FinCEN. 

Here are a few strategies:

1. Regularly Review FinCEN’s Website: FinCEN’s website is the primary source for official updates and FAQs. Regularly checking the site ensures that you have the most current information.
2. Subscribe to FinCEN Updates: If you subscribe to FinCEN Updates here, you will be notified of all News Releases, including when updates are made to the BOI FAQs.
3. Partner with Compliance Experts: Working with compliance professionals, such as CPAs and attorneys, can provide additional insights and interpretations of new FAQs. These experts can help you implement the guidance effectively.

Navigating the complexities of BOI reporting under the CTA can be challenging, but staying updated with the latest FAQs can make a significant difference. By understanding and implementing the guidance provided in these FAQs, businesses can ensure compliance, protect their data, and avoid penalties.

As new FAQs become available, make it a priority to dig into the details and adapt your compliance strategies accordingly. This proactive approach will help your business stay ahead in the ever-evolving regulatory landscape.

Once a company submits its initial FinCEN Beneficial Ownership Information (BOI) report, the responsibility doesn’t end there. In fact, companies are required to report any updates to their BOI report within 30 days of the change – even if it occurs before the end of 2024 (the initial reporting deadline for pre-2024 entities).

Failing to update your BOI within the specified timeframe can lead to significant penalties! Staying on top of these updates is not just about compliance—it’s about protecting your business from potential legal and financial consequences.

What Changes Require You to Update Beneficial Ownership Information?

What changes require you to update beneficial ownership information? Here’s a quick summary of the key items that require an update:

1. Changes in Beneficial Ownership: If a new beneficial owner or a previous beneficial owner no longer holds ownership interest or substantial control, you must update this information promptly.
2. Changes in Beneficial Owner Information: If a current beneficial owner moves to a new residential address or is issued a new Driver’s License containing a new ID number, this information must be reported.
3. Changes in Entity Information: Registering a new DBA name or moving to a new principal address needs to be reported.
4. Corrections: Any errors in previously filed BOI reports should be corrected within 30 days of noticing the inaccurate information.

Does the 30-Day Window Matter?

The 30-day window for reporting updates and corrections is strict. Whether you need to update beneficial ownership information or correct a mistake, timely reporting is essential to maintaining compliance. Ignoring this obligation could expose your business to penalties, including fines that compound the longer you delay.

Stay Ahead of Compliance

Maintaining an updated BOI report is a continuous process. As business circumstances evolve, so too must your compliance efforts. Staying informed and proactive in updating your BOI ensures that your company remains in good standing with FinCEN’s requirements.

Don’t wait until the deadline approaches—act promptly to update your BOI and avoid the pitfalls of non-compliance.

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What Happens After the Initial BOI Report?

As a business owner, staying ahead of regulatory changes is stressed for maintaining compliance and avoiding penalties.
 
One significant legislative shift that demands your immediate and ongoing attention is the Corporate Transparency Act (CTA). Once you have filed the initial BOI Report for your company, it’s important to realize that CTA reporting is NOT a one-time or even annual requirement.
 
Updates are required as often as information changes about the company or it’s beneficial owners, and it is mandatory to report these within 30 days of any change.
 
Companies must establish processes for managing this component of the new requirement, especially as ownership and control structures shift. Because these changes need to be reported as they occur, now is the time to develop a plan of action for timely filing and to consider the new policies and procedures that come with this responsibility.
 
People are not accustomed to reporting changes in their personal information to the company, such as informing them of a new Driver’s License with a different ID number or a name change after getting married.
 

Which Changes Require Updated Reporting?

Some other changes that will trigger the need for updated reporting include:
 

1. Modifications in Beneficial Owner Information: Changes in legal name, residential address, and ID numbers from a Drivers License or passport.

Changes about the company or it’s structure will also trigger updates, including: 

1. Changes in Company Information: Registering a new trade or doing-business-as name or moving to a new business address.
2. Alterations in Beneficial Ownership: Appointment of new beneficial owners with substantial control, change in ownership structure – especially if it involves someone reaching or surpassing the 25 percent ownership interest threshold – departure or resignation of a beneficial owner, the death of a beneficial owner, or inheritance of ownership interest.

Considering these changes, the reporting will need to be done promptly. However, it involves more than just filing the report. There are a few things you need to consider to ensure your business complies with the CTA and mitigates their risk of non compliance:

Educating Beneficial Owners (BOs)

Beneficial owners must be informed about their reporting obligations and the necessity to notify the company of any changes in their information immediately, as the company only has 30 days to report this update.
 
To facilitate this, beneficial owners need to be made aware of the information they must keep up-to-date with the company. Managers and personnel with substantial control, senior officers, and certain BODs are the types of people at a company that should be informed about these update requirements.
 
It’s also important to inform HR representatives to establish processes for collecting certain information upon hire.
 
Establishing a regular schedule for verifying current information with beneficial owners – depending on the size and structure of your organization, is a sound strategy. 
 
If your lawyer or CPA is responsible for maintaining compliance, they must also be notified when non-client owners have a change in information. This may involve introducing certain owners to your lawyer or CPA to ensure a clear line of communication for these updates. If not, the engaged owner must communicate with the other beneficial owners and then relay the information to the professional.

Human Resources Coordination

If you haven’t yet discussed this with your HR team or those handling employee relations at your company, now is the time to do so. The HR team needs to be thoroughly familiar with the CTA requirements, especially those related to substantial control roles.
 
They must ensure that new hires in positions of substantial control are informed about their reporting obligations during the onboarding process, including the collection of necessary personal information as part of their employment documentation.
 
Beneficial owners are not only the individuals that work at the company but also those who hold at least 25% ownership interests. For example, if your company is owned by someone and their spouse, but the spouse doesn’t work at the company, HR will need to make sure that the spouses information is acquired and maintained.
 
Additionally, make sure that someone on your team is monitoring any updates or changes in the regulations from FinCEN that may require adjustments to internal processes or reporting procedures.
 

Establishing New Policies and Procedures

Creating new standard operating procedures (SOPs) is critical for compliance. Develop clear policies outlining the process for updating required information or even updating their FinCEN IDs. Ensure these policies are easily accessible and understood by all relevant parties. Integrate these policies into your hiring and onboarding processes so new hires are immediately aware of their responsibilities.
 
Ask yourself these questions:
 

• How often will you remind beneficial owners about the need to make updates? Will you need to provide them resources more than once to educate them?
• Will you proactively ask beneficial owners if they had any changes in their information? Who will do this and how often?
• What is the channel for the beneficial owner to inform the designated individual about any changes to their information?
• Who is responsible for submitting the updated BOI Reports?
• Is HR watching for changes in job descriptions or new roles that might give someone substantial control, thus requiring an updated report including that individual as a beneficial owner?
• •  

Since some updates will need to be made through the individuals’ login.gov accounts – if they have a FinCEN ID –  it’s essential to ensure that beneficial owners maintain secure access to their accounts and understand how to promptly update their information. Develop policies to verify that the update was made in their account correctly and on time to ensure the company has met its responsibilities.
 

Responsibility for Filing Updates

Determine who will be responsible for filing updates with FinCEN. Will it be a business owner, CPA, or another designated individual? Clear delegation can prevent lapses in compliance.
 
A major consideration for ensuring personal information gets reported is when individuals obtain a FinCEN Identifier. When an individual gets a FinCEN ID, the company’s ability to file certain updates may be restricted.
 
This is because once an individual has a FinCEN ID and uses it on the BOI Report in place of their required information, they can only update their information through their login.gov account. For instance, an individual should inform the company of a change in their home address, but they will be responsible for reporting that change in their login.gov account.
 
If they hadn’t obtained a FinCEN ID, the change in address would be reported by the company in an updated BOI Report. Companies need to carefully consider this because BOI Reporting is their responsibility to ensure all reported information is accurate. Implementing a system to verify that beneficial owners have actually filed their information with FinCEN might involve collecting proof of submission from the individuals.
 
If you find yourself needing to file many updates during the year or you’re not sure how many you will need, it’s not too late to consider using a software to enhance management even reduce the amount of time it takes for ongoing CTA compliance.
 
Software solutions, like Secure Compliance, are designed to collect, store, and manage personal information securely. This can streamline the process, provide a channel for owners to report their updated information, and ensure that data is easily accessible when needed.  Our software also ensures that personal information remains in our software, not on the company’s servers.  
 
Reporting software can also reduce the number of times you need to reenter information.
 
When using the FinCEN website or some other software, you have to reenter all details of the report, even if the update is just one address of a beneficial owner.
 
For companies with multiple related entities or even for just one entity with continuously changing information, software can store the owners’ information so you don’t have to enter the same person on each report—enter it once and tie it to all desired entities or change the one item of information and file.
 
Secure Compliance subscriptions also offer unlimited updates, so you won’t have to worry about how many updates or corrections you’ll need to file throughout the year.
 
The CTA introduces new complexities for business owners, but with careful planning and the right tools, you can navigate these changes successfully. By establishing clear procedures, leveraging professional assistance, and utilizing technology, your business can stay compliant and avoid the potential pitfalls of this new regulatory landscape.

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The Corporate Transparency Act (CTA) mandates that reporting companies must report their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN) to promote transparency and combat illicit activities. To comply with these regulations, entities must first file an initial BOI Report by their first due date. However, while some companies may very rarely need to file another report, there will be many that will file the different types of BOI reports at various stages. Here, we explain the four types of BOI reports required under the CTA: Initial, Update, Correction, and Newly Exempt Entity.

1. Initial Report

The initial report is the first BOI report that each entity must file by their respective due date. This report sets the foundation for compliance and will be submitted only once. The due dates for filing the initial report are as follows:

• Entities formed before January 1, 2024 have until January 1, 2025, to file their initial report.
• Entities formed in 2024 have 90 days from the confirmation of formation to file their initial report.
• Entities formed in 2025 and beyond must file their initial report within 30 days of formation.

2. Updated Report

An updated report is required when any previously filed information becomes outdated or incorrect. Entities must file an updated report within 30 days of the change in information. Situations that may trigger the need for an updated report include changes in beneficial ownership, changes in the entity’s address, or changes in the personal details of beneficial owners. Some entities may not file an updated report for years after filing their initial report, others may need to file just after a few months. There is no limit to how many updated BOI Reports can be filed.

3. Corrected Report

A corrected report is necessary when an entity realizes that the information previously filed was inaccurate. This report must be filed within 30 days of discovering the mistake. The corrected report ensures that the BOI database remains accurate and reliable. Common errors that might necessitate a corrected report include typographical errors, incorrect DOBs, incorrect residential addresses, or omitted beneficial owners.

4. Newly Exempt Entity Report

The newly exempt entity report is for entities that have already filed an initial BOI Report but subsequently meet the criteria for an exemption from reporting. This applies to entities that fall into one of the 23 categories of exempt entities outlined by the CTA. Once an entity qualifies for exemption, it has 30 days to file a newly exempt entity report. It is essential to monitor the exemption status continually, as changes in the entity’s status might require re-filing under the CTA.

Maintaining Transparency

Compliance with the Corporate Transparency Act requires entities to understand and accurately file the appropriate BOI reports. The initial report sets the compliance baseline, while updated and corrected reports ensure ongoing accuracy. The newly exempt entity report acknowledges changes in status that affect reporting obligations. By adhering to these requirements and maintaining vigilance over any changes in information or status, entities can ensure compliance and contribute to the broader goals of transparency and integrity in corporate governance.

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BOI Updating Requirements

With the introduction of the Corporate Transparency Act (CTA), the importance of maintaining current Beneficial Ownership Information (BOI) reports has never been more critical. As an estimated 1.5 million “initial reports” have already been filed, entities must now ensure that their records are meticulously kept up-to-date so that subsequent “updated reports” will be filed with FinCEN. This necessitates not only informing clients about what specific changes trigger the need for a filing but also establishing robust internal processes to guarantee these updates are submitted on time. With this in mind, what are the BOI updating requirements? 

Updates must be filed within 30 days of any relevant change, covering everything from shifts in ownership percentages to alterations in corporate structure or beneficial owner details. Below are some examples of what may cause a reporting company to file an updated report.

Changes in Company Information

A fundamental trigger for an updated BOI report (BOIR) is any change to the information related to the reporting company itself. These changes can include: 

1. Registering a new trade or doing-business-as name: If a company decides to operate under a new name, this must be accurately reflected in an updated BOI report.
2. Changes in company structure: Modifications to the legal structure, mergers, or other corporate events that affect the company’s ownership and management structure need to be reported.
3. Contact information changes: Updated addresses or contact details should be promptly reflected in the report to ensure that regulatory authorities can reach the company when necessary.

Alterations in Beneficial Ownership

The heart of a BOI report lies in its disclosure of beneficial owners – the individuals or entities that own or control a significant portion (25% or more) of the business. The following scenarios can trigger the need for an updated BOI report: 

1. Appointment of new beneficial owners: When a new individual or entity acquires or assumes control of a substantial portion of the business, they must be accurately documented.
2. Change in ownership structure: The sale of shares or assets that results in a change in ownership structure, especially if it involves someone reaching or surpassing the 25 percent ownership interest threshold, requires an updated report.
3. Departure or resignation of a beneficial owner: If a beneficial owner leaves the company or resigns from their position of significant control, this change must be reported.
4. Death of a beneficial owner or inheritance of ownership interest: When a beneficial owner passes away, the updated report will need to exclude the owner and replace (if applicable) with any new beneficial owners that result from the change. Those who have ownership interest solely through the right of inheritance are one of the 5 exceptions to the definition of a beneficial owner, however, once they do inherit the interest an update must be filed to report the new owner.

Modifications in Beneficial Owner Information

Individuals or entities identified as beneficial owners in a BOI report are required to provide specific information. Changes in this information trigger the need for an update, such as: 

1. Change of name: If a beneficial owner obtains a new legal name, it should be promptly reflected in the report.
2. Address updates: Alterations in a beneficial owner’s address should be accurately documented in the report.
3. Unique identifying numbers: Any changes to unique identifying numbers, such as passport or driver’s license information, need to be updated to maintain accuracy. Along with this, companies may need to provide an image of the updated identifying document, further ensuring the authenticity of the changes.

 It’s essential to understand that obtaining FinCEN Identifiers (FinCEN IDs) can streamline the reporting process and potentially eliminate the need for updated reports for the changes listed above. When individuals register for a FinCEN ID through their login.gov account, they directly submit their personal information to FinCEN. This ID can then be included in the entity’s BOIR. Consequently, if there is a change in the individual’s personal details, they simply update their information via their login.gov account. Since the FinCEN ID connects the owner to the entity and FinCEN maintains their current details independently, the entity itself is not required to file an updated report for these kinds of changes.

When to Provide a Corrected BOI Report

If the information in a report about beneficial ownership is found to be inaccurate, your company is required to rectify it within 30 days of becoming aware of the inaccuracies or having reason to know about them. This correction pertains to any inaccuracies in the mandatory details concerning your company, its beneficial owners, or its applicants.

The Importance of Timely Updates

Failing to update a BOI report within 30 days of the change (there is a proposed extension to 90 days for 2024 only) can result in compliance issues, financial penalties, and legal consequences. To ensure that businesses operate within the bounds of the law, it is essential to stay vigilant and promptly respond to triggers that necessitate an updated BOI report.

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Who is Responsible for Certifying BOI Reports?

The process of filing a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN) is a crucial aspect of ensuring financial transparency and combating illicit activities such as money laundering and terrorist financing. A particularly significant component of this process is the certification of the BOI report. This certification mandates that the individual filing the report on behalf of a reporting company must affirm that they are authorized to do so and that the information within the report is true, correct, and complete. Given the serious civil and criminal penalties associated with non-compliance and fraudulent filings, this requirement places a substantial burden of responsibility on the certifier. According to the final regulations provided by FinCEN: “While an individual may file a report on behalf of a reporting company, the reporting company is ultimately responsible for the filing. The same is true of the certification. The reporting company will be required to make the certification, and any individual who files the report as an agent of the reporting company will certify on the reporting company’s behalf.” This distinction is crucial and offers a semblance of reassurance to professionals who are hesitant to involve themselves in the certification process due to the potential legal ramifications. However, the apprehension among legal professionals, CPAs, and advisors about becoming the filer for their clients remains palpable. The liability associated with certifying a report as true, correct, and complete is significant. In light of these concerns, professionals may opt to take a more advisory role, guiding their clients through the preparation of the report but ultimately having the client review and submit it themselves. This approach not only mitigates the professional’s legal exposure but also ensures that the reporting company maintains ultimate responsibility for the certification and submission of the report. Secure Compliance software can facilitate this advisory approach by allowing professionals to collect necessary signatures from their clients and ensuring that the owner certifies the filing. By using such software, professionals can provide a range of services—from premium, white-glove assistance to more basic guidance—without appearing as the preparer on the submitted report. Beyond the filing process, professionals have a duty to educate their clients on compliance matters, including the triggers for updating the BOI report. Changes such as the hiring of new officers could necessitate an update, and professionals must decide whether to directly manage these updates for their clients or to empower them with the resources to handle changes independently. This education component is critical for ensuring that clients can confidently certify their filings, understanding the obligations and potential repercussions involved.

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