Corporate Transparency Act Fines Entities $500/Day for Late FinCEN BOI Reports

by LLC attorneys Richard Keyt and his son Richard C. Keyt

We have formed 9,000+ LLCs and 410+ nonprofit corporations. We are business law and estate planning attorneys. Our law firm is KEYTLaw, LLC. We have 354 five star Google, FaceBook & Birdeye reviews. Our website is www.keytlaw.com

For more about the Corporate Transparency Act go to our sister company FinCEN Filer, LLC's, blog page and YouTube channel.  FinCEN Filer's business is preparing and filing FinCEN BOI reports.  See its services page.

A federal law called the Corporate Transparency Act that became effective on January 1, 2024, requires all “reporting companies” to file a report with FinCEN that discloses information about the reporting company, all of its beneficial owners, and the reporting company's “applicant” if the company was formed after 2023.  If a reporting company fails to file a FinCEN BOI report on or before the report’s due date the U.S. Treasury can fine the company $500 a day until the company files its report.  The CTA also has criminal penalties of up to two years in jail for willful violations of the law.

Suggestion:  If you have friends that own companies you should send them a link to this article so they can learn how to prevent their company from being fined $500 a day for not filing or late filing of the company's FinCEN BOI report.

We made a video of this article.  Click to watch the video below called “Demystifying the Corporate Transparency Act: What You Need to Know.”

The Keyts are the owners of FinCEN Filer, LLC, at https://fincenfiler.com.  This website has tons of information about the Corporate Transparency Act. They formed FinCEN Filer, LLC, to collect information about the beneficial owners of reporting companies and file the company's FinCEN Beneficial Owner report with the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Treasury.  To hire FinCEN Filer to prepare and file a FinCEN BOI report go to https://fincenfiler.com/services.

See FinCEN Filer’s YouTube channel at https://www.youtube.com/@fincenfiler This channel has all of the videos referenced in this article plus a lot of additional videos that explain the Corporate Transparency Act and FinCEN Beneficial Owner Information reports.

The Corporate Transparency Act

The purpose of this article is to warn owners of U.S. companies and foreign companies that do business in the U.S. about a federal law called the Corporate Transparency Act that became effective on January 1, 2024. The CTA requires all “reporting companies” to file a report with FinCEN that discloses information about:

  • The reporting company.
  • The beneficial owners of the reporting company.
  • The reporting company's “applicant” if the company was formed after 2023.

When KEYTLaw, LLC, forms an LLC or PLLC after 2023 the new reporting company will have two applicants, Richard Keyt and his legal assistant.  We send an email to the company's contact person shortly after we form the company that gives discloses the FinCEN identifier for Richard and his legal assistant so people who file their company's FinCEN BOI report can enter the identifiers on the FinCEN BOI report.

Click to watch the video below called “What is an Applicant in a FinCEN BOI Report.”

Report Filing Deadlines

FinCEN BOI report filing deadlines depend on when an entity was formed. Companies formed before 2024 must file their FinCEN BOI report on or before December 31, 2024. Companies formed in 2024 must file their FinCEN BOI report within 90 days of the date the company was created. Companies formed after 2024 must file their FinCEN BOI report within 30 days of the date the company was created.

If a reporting company fails to file a FinCEN BOI report on or before the report’s due date FinCEN can fine the company $500 a day until the company files its report. Yes. The fine is $500 for each day the Corporate Transparency Act report is delinquent. The CTA also has criminal penalties of up to two years in jail for willful violations of the law.

FinCEN estimates that more than 32 million U.S. entities are reporting companies that must file a FinCEN report in 2024. Almost all entities formed in the U.S. are reporting companies, regardless of when the company was formed.

Exempt Entities

There are 23 types of entities that are not reporting companies and that do not have to file a FinCEN BOI report.  See the list of the 30 Corporate Transparency Act exemptions to determine if an entity is not a reporting company and not required to file a FinCEN BOI report.  Here are some of the more common types of entities that are exempt from filing a FinCEN BOI report:

  1. Securities reporting issuer
  2. Governmental authority
  3. Bank
  4. Credit union
  5. Depository institution holding company
  6. Money services business
  7. Broker or dealer in securities
  8. Securities exchange or clearing agency
  9. Other Exchange Act registered entity
  10. Investment company or investment adviser
  11. Venture capital fund adviser
  12. Insurance company
  13. State-licensed insurance producer
  14. Commodity Exchange Act registered entity
  15. Accounting firm
  16. Public utility
  17. Financial market utility
  18. Pooled investment vehicle
  19. Tax-exempt entity
  20. Entity assisting a tax-exempt entity
  21. Large operating company
  22. Subsidiary of certain exempt entities
  23. Inactive entity

See our video called “Is Your Company Exempt from Filing a FinCEN BOI Report?”

Large Operating Company Exemption

An exemption that will apply to a lot of companies is the large operating company exemption.  To qualify for this exemption from filing a FinCEN BOI report all of the following conditions must apply to the company:

  1. The entity employs more than 20 full-time employees. Full-time employee means, with respect to a calendar month, an employee who is employed an average of at least 30 hours of service per week with an employer.
  2. More than 20 full-time employees of the entity are employed in the United States.
  3. The entity has an operating presence at a physical office within the United States.
  4. The entity filed a federal income tax or information return in the United States for the previous year demonstrating more than $5,000,000 in gross receipts or sales.
  5. The entity reported this greater-than-$5,000,000 amount as gross receipts or sales (net of returns and allowances) on the entity’s IRS Form 1120, consolidated IRS Form 1120, IRS Form 1120-S, IRS Form 1065, or other applicable IRS form.
  6. When gross receipts or sales from sources outside the United States, as determined under federal income tax principle, are excluded from the entity’s amount of gross receipts or sales, the amount remains greater than $5,000,000.

Inactive Entities Exemption

Inactive entities are also exempt from filing a FinCEN BOI report. An inactive entity does not have to file a FinCEN BOI report if all six of the following criteria apply:

  1. The entity was in existence on or before January 1, 2020.
  2. The entity is not engaged in active business.
  3. The entity is not owned by a foreign person, whether directly or indirectly, wholly or partially. “Foreign person” means a person who is not a United States person. A United States person is defined in section 7701(a)(30) of the Internal Revenue Code of 1986 as a citizen or resident of the United States, domestic partnership and corporation, and other estates and trusts.
  4. The entity has not experienced any change in ownership in the preceding twelve-month period.
  5. The entity has not sent or received any funds in an amount greater than $1,000, either directly or through any financial account in which the entity or any affiliate of the entity had an interest, in the preceding twelve-month period.
  6. The entity does not otherwise hold any kind or type of assets, whether in the United States or abroad, including any ownership interest in any corporation, limited liability company, or other similar entity.

Recommendation: People who have inactive entities regardless of their formation date should legally terminate the company so it won’t get fined for not filing a FinCEN BOI report.  To hire us to terminate an Arizona LLC complete and submit our service agreement at www.keytlaw.com/azllclaw/termination-questionnaire  For more information on terminating an Arizona LLC, see my article on this subject at www.keytlaw.com/azllclaw/terminating-llcs/how-to-terminate-an-az-llc

See our video called “Must a Dormant Entity File a FinCEN BOI Report.”

FinCEN BOI Report Contents

The reporting company must include the following information in its FinCEN report:

  • Company’s legal name;
  • Any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names;
  • The current street address of its principal place of business if that address is in the United States (for example, a U.S. reporting company’s headquarters), or, for reporting companies whose principal place of business is outside the United States, the current address from which the company conducts business in the United States (for example, a foreign reporting company’s U.S. headquarters);
  • Its jurisdiction of formation or registration; and
  • Its Taxpayer Identification Number (or, if a foreign reporting company has not been issued a TIN, a tax identification number issued by a foreign jurisdiction and the name of the jurisdiction).

See our video called “What Reporting Company Information is in a FinCEN BOI Report?”

Who is a Beneficial Owner?

A reporting company’s FinCEN report must contain information about every beneficial owner of the reporting company. A beneficial owner is an individual who, directly or indirectly, through any contract (such as a trust agreement), arrangement, understanding, relationship, or otherwise (i) exercises substantial control over the entity; or (ii) owns or controls not less than 25 percent of the ownership interests of the entity.

A reporting company can have multiple beneficial owners. For example, a reporting company could have one beneficial owner who exercises substantial control over the reporting company, and a few other beneficial owners who own or control at least 25 percent of the ownership interests of the reporting company. A reporting company could have one beneficial owner who both exercises substantial control and owns or controls at least 25 percent of the ownership interests of the reporting company. There is no maximum number of beneficial owners who must be reported.

FinCEN expects that every reporting company will be substantially controlled by one or more individuals, and therefore that every reporting company will be able to identify and report at least one beneficial owner to FinCEN.  Reporting companies are required to identify all individuals who exercise substantial control over the company. There is no limit to the number of individuals who can be reported for exercising substantial control. An individual exercises substantial control over a reporting company if the individual meets any of four general criteria:

  1. the individual is a senior officer;
  2. the individual has authority to appoint or remove certain officers or a majority of directors of the reporting company;
  3. the individual is an important decision-maker; or
  4. the individual has any other form of substantial control over the reporting company. See the chart below for details about these criteria.

If an individual falls into any of the categories below, the individual is exercising substantial control:

  • The individual is a manager of a limited liability company even if the individual is not a member of the LLC.
  • The individual is a trustee of a trust that owns 25% or more of an entity or who has control of the entity.
  • The individual is the company’s president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer who performs a similar function.
  • The individual has the authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company.

Reporting companies are required to identify all individuals who own or control at least 25 percent of the ownership interests of the company. Any of the following may be an ownership interest: equity, stock, or voting rights; a capital or profit interest; convertible instruments; options or other non-binding privileges to buy or sell any of the foregoing; and any other instrument, contract, or other mechanism used to establish ownership. A reporting company may have multiple types of ownership interests.

The following individuals may hold ownership interests in a reporting company through a trust or similar arrangement:

  • A trustee or other individual with the authority to dispose of trust assets.
  • A beneficiary who is the sole permissible recipient of trust income and principal or who has the right to demand a distribution of or withdraw substantially all of the trust assets.
  • A grantor or settlor who has the right to revoke or otherwise withdraw trust assets.

Exceptions to Beneficial Owner

There are five exceptions to the definition of beneficial owner. When an individual who would otherwise be a beneficial owner of a reporting company qualifies for an exception, the reporting company does not have to report that individual as a beneficial owner in its BOI report to FinCEN.   The five exceptions are:

  1. Minor Child: An individual qualifies for this exception if the individual is a minor child, as defined under the law of the State or Indian tribe in which the domestic reporting company is created or the foreign reporting company is first registered.  The reporting company may instead report information about the parent or legal guardian of the minor child. Note: This exception only applies if a parent or legal guardian’s information is reported in lieu of the minor child’s information. Also, when the minor child reaches the age of majority, as defined by the law of the State or Indian tribe in which the reporting company was created or first registered, the exception no longer applies. At that time, if the individual is a beneficial owner, the reporting company must file an updated BOI report providing the individual’s own information.
  2. Nominee, intermediary, custodian, or agent: An individual qualifies for this exception if the individual merely acts on behalf of an actual beneficial owner as the beneficial owner’s nominee, intermediary, custodian, OR agent. Note: Individuals who perform ordinary advisory or other contractual services (such as tax professionals) likely qualify for this exception. In scenarios where this exception applies, the actual beneficial owner must still be reported.
  3. Employee: An individual qualifies for this exception if all three of the following criteria apply: (i) The individual is an employee of the reporting company, when applying the meaning of “employee” provided in 26 CFR 54.4980H-1(a)(15). In general, the term employee means that an individual is subject to the will and control of the employer in what and how to do work, and that the employer may discharge the individual from work.  (ii) The individual’s substantial control over, or economic benefits from, the reporting company are derived solely from the employment status of the individual as an employee.  (3) The individual is not a senior officer of the reporting company. The term “senior officer” means any individual holding the position or exercising the authority of a president, chief financial officer, general counsel, chief executive officer, or chief operating officer, or any other officer, regardless of official title, who performs a similar function.
  4. Inheritor: The individual’s only interest in the reporting company is a future interest through a right of inheritance, such as through a will providing a future interest in a company.  Note: Once the individual inherits the interest, this exception no longer applies, and the individual may qualify as a beneficial owner.
  5. Creditor: An individual qualifies for this exception if the individual is a creditor of the reporting company. The term “creditor” means an individual who would meet the definition of a beneficial owner of the reporting company solely through rights or interests for the payment of a predetermined sum of money, such as a debt incurred by the reporting company, or a loan covenant or other similar right associated with such right to receive payment that is intended to secure the right to receive payment or enhance the likelihood of repayment. For example, an individual qualifies for the creditor exception if the individual is entitled to payment from the reporting company to satisfy a loan or debt, so long as this entitlement is the only ownership interest the individual has in the reporting company.

Watch our video on this subject called “Definition of Beneficial Owner Disclosed in a FinCEN BOI Report.”

Beneficial Owner Information

For each individual who is a beneficial owner, a reporting company must include the following information about each beneficial owner in its FinCEN BOI report:

  • The individual’s legal name;
  • Date of birth;
  • Residential address;
  • An identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of identification; and
  • The reporting company will also have to upload an image of the beneficial owner's identification document that shows the identifying number in the document.

Applicant Information

Reporting companies formed after 2023 must include in their FinCEN reports information about the reporting company’s applicants. A reporting company that must report its company applicants will have only up to two individuals who could qualify as company applicants:

  • The individual who directly files the articles of organization, articles of incorporation, or certificate of partnership with a state agency such as a Secretary of State or the Arizona Corporation Commission or a tribe; and
  • If more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing.

If a paralegal files an LLC's Articles of Organization while working for a lawyer the paralegal and the lawyer are both applicants and the information about both applicants must be disclosed in the reporting company's FinCEN BOI report.

When KEYTLaw, LLC, forms an LLC or PLLC after 2023 the new reporting company will have two applicants, Richard Keyt and his legal assistant.  We send an email to the company's contact person shortly after we form the company that gives the new company's contact person the FinCEN identifiers for Richard and his legal assistant so people who file their company's FinCEN BOI report can enter the identifiers on their do-it-yourself FinCEN BOI report.

For each applicant a reporting company must include in its FinCEN report the same information required of beneficial owners.

Click to watch the video below called “What is an Applicant in a FinCEN BOI Report.”

Warning: Legal Consequences of Filing a False FinCEN BOI Report

The video below should be watched by everybody who will file a FinCEN BOI Report.  Do not file a FinCEN BOI report unless you understand the legal consequences of filing a false report which is explained in the video.

If you intend to submit a FinCEN Beneficial Owner Information report you need to understand that you can be fined and/or imprisoned if you file a FinCEN BOI report that contains false or fraudulent information.  People who file FinCEN BOI reports for companies that have multiple beneficial owners are particularly at risk because they have to hope that all the beneficial owners give them correct and complete information about themselves.

The person who submits a FinCEN BOI report must check a box on the FinCEN BOI report that says

“I certify that I am authorized to file this BOIR on behalf of the reporting company. I further certify, on behalf of the reporting company, that the information contained in this BOIR is true, correct, and complete.  The willful failure to report complete beneficial ownership information to FinCEN, the willful failure to update beneficial ownership information provided to FinCEN when previously reported information changes, or the willful provision of false or fraudulent beneficial ownership information to FinCEN, may result in civil or criminal penalties. A person may also be subject to civil or criminal penalties for willfully causing a reporting company to report incomplete or false beneficial ownership information to FinCEN.”

Every person who will file a FinCEN BOI report that has one or more beneficial owners other than the filer and the filer’s spouse should not file the report until every beneficial owner signs an affidavit that discloses the signer’s information and that causes the signer to represent and warrant that all the information given to the filer by the beneficial owner is true, correct, and complete.

Purchase an editable Word Beneficial Owner Information Report Affidavit that asks a beneficial owner to enter the beneficial owner’s FinCEN information into the Affidavit and represent and warrant by signing the Affidavit that all of the beneficial owner's information in the Affidavit is true, correct, and complete.  The owner must sign the Affidavit and have his or her signature notarized.  You can buy our editable Word Affidavit and customize it for your company and beneficial owners.  Don’t file a FinCEN BOI Report without confirming that all beneficial owner information is true, correct, and complete.

Buy Our Editable Affidavit Form

Click here to buy FinCEN Filer, LLC's, editable Word Beneficial Owner Affidavit for $97.  Immediately upon paying for the form FinCEN Filer's system will email a Word version of the form to the email address given in the order form.

You must watch the FinCEN Filer's video called “Alert: Legal Consequences of Filing a False FinCEN BOI Report.”