In 2021, Congress enacted the bipartisan Corporate Transparency Act to curb illicit finance. This law requires many companies doing business in the United States to report information about who ultimately owns or controls them.
Avoid $591 a Day in Civil Penalties, $10,000 in Criminal Penalties, and Up to Two Years in Prison
Beneficial Ownership Information (BOI) reporting applies to affected entities in existence on January 1, 2024, as well as those created in 2024 and later. Whether these are single-member LLCs, small multi-member LLCs, small S corporations, or small C corporations, they may be required to provide detailed reporting on their beneficial owners—the humans who own or control these entities.
The new FinCEN reporting applies to many of your clients’ businesses (and rental properties owned in LLCs). The details and nuances may shock you.
Small corporations and LLCs are those with
• 20 or fewer full-time employees.
• $5 million or less in domestic gross receipts reported on their prior tax return.
• A physical U.S. presence.
To ensure compliance, the penalties for willfully violating the Business Ownership Information (BOI) reporting requirements include
• Civil penalties of up to $591 for each day a violation is not remedied.
• A criminal fine of up to $10,000.
• Possible imprisonment of up to two years.
There’s no limit to the number of people subject to these penalties. Senior managers, corporate entities, and others can be held liable for willful violations of the BOI filing rules, including
• Anyone who willfully files a false or fraudulent BOI report on a company’s behalf.
• Anyone who willfully provides false information to the filer of a BOI report.
• Beneficial owners who willfully fail to file a BOI report or file a false report, including corporate officers, directors, or employees and LLC members, employees, and trustees.
The new regulations are designed to enhance transparency, making it more difficult to conceal illicit activities through anonymous corporate structures. While your clients operate with integrity, they nevertheless will likely have to file with FinCEN and report any changes within 30 days.
The rules are effective for both new and existing entities in 2024:
• New entities have to file within 90 days of formation.
• Existing entities have to file on or before January 1, 2025 (which is closer than you think).
Ignoring the new reporting requirements is not an option—
New Federal Reporting Requirement for Beneficial Ownership Information (BOI)
Effective January 1, 2024, many companies in the United States must report information about their beneficial owners—the individuals who ultimately own or control the company—to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.
Beneficial ownership information reporting is not an annual requirement. Unless a company needs to update or correct information, a report only needs to be submitted once.
Who Has to Report?
Companies required to report are called reporting companies. Reporting companies may have to obtain information from their beneficial owners and report that information to FinCEN.
Your company may need to report information about its beneficial owners if it is:
1. a corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe; or
2. a foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing.
Who Does Not Have to File?
Twenty-three types of entities are exempt from beneficial ownership information reporting requirements, including publicly traded companies, nonprofits, and certain large operating companies.
FinCEN’s Small Entity Compliance Guide includes checklists for each of the 23 exemptions that may help determine whether your company qualifies for an exemption. Please review Chapter 1.2 of the Guide for more information.
When Do I Report?
FinCEN began accepting reports on January 1, 2024.
• If your company was created or registered prior to January 1, 2024, you will have until January 1, 2025 to report BOI.
• If your company is created or registered in 2024, you must report BOI within 90 calendar days after receiving actual or public notice that your company’s creation or registration is effective, whichever is earlier.
• If your company is created or registered on or after January 1, 2025, you must file BOI within 30 calendar days after receiving actual or public notice that its creation or registration is effective.
• Any updates or corrections to beneficial ownership information that you previously filed with FinCEN must be submitted within 30 days.