There has been a significant amount of confusion regarding the new and mostly unknown Beneficial Ownership Information (BOI) reporting requirements, so let’s get to the bottom of what it is and what you need to do to keep your business out of trouble.
In 2021, Congress passed the Corporate Transparency Act (CTA), a law to help prevent financial crimes like money laundering, corruption and tax fraud. Among other things, the law requires certain business entities to disclose information about their owners, and those who control the business, to the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury. The objective of this national registry is to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures. This provision brings it in line with many European nations that already have beneficial ownership registries in place.
With that said, does your business need to comply? If your business meets either of the two, then yes.
- 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 Native American tribe.
- A foreign company and was registered to do business in any U.S. state or Native American tribe by such a filing.
I think that covers just about every business unless you are a sole proprietor, so unless you fall into one of these exemptions, you will need to file. Exempt companies include;
- publicly traded companies,
- non-profits,
- insurance companies,
- public utilities, and
- certain large operating companies which are defined as having 20 or more full-time United States-based employees and a physical office in the U.S. with more than $5 million in gross receipts or sales from U.S. sources reported to the Internal Revenue Service (IRS).
While the CTA was passed in 2021, the mandatory BOI reporting just began on January 1, 2024. A company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial beneficial ownership information report. A company created or registered on or after January 1, 2024, will have 90 calendar days after receiving notice of the company’s creation to file. The due date will become even shorter for new companies created starting January 1, 2025. They will have a short 30 days to file their BOI report after the company’s creation.
Once an original BOI filing is completed, you will be required to file updates and corrections to FinCEN to report if any of the information related to the beneficial owners of the entity has changed or needs to be corrected. These updates must be reported within 30 days of the date of change. An example of a reportable change is the change of resident address for a beneficial owner, or a change in ownership.
The penalties for non-compliance are steep. A business and its senior officers may incur civil penalties of up to $500 per day or criminal penalties, including imprisonment for up to two years and/or a fine of up to $10,000.
As one would imagine, this new reporting requirement has not come without controversy. The National Small Business Association filed a lawsuit against this Act, and in March of this year, an Alabama Federal District Court found the Act and BOI reporting to be unconstitutional and granted summary judgment for the plaintiffs. This ruling has led to many people (initially, myself included) believing that the requirements to complete the BOI reporting are on hold. However, the ruling to suspend the filing requirement only applies to the plaintiffs in the specific case. So unless your business happens to be a member of the National Small Business Association, you are still required to file.
The full FinCEN guide on compliance can be found here: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf
If you are looking for additional answers beyond what is covered here, then the BOI FAQ provided by FinCEN may have what you are looking for: https://www.fincen.gov/boi-faqs
PayMaster has developed our Beneficial Ownership Information (BOI) report filing service to handle the filing process and ensure your business remains compliant with federal regulations. Our service is fast and secure, providing a reliable and efficient solution for you to meet the filing deadline. PayMaster’s offering this service is not affiliated, endorsed or approved by any governmental entity or agency and we do not provide legal or financial advice. Our engagement is limited to having one of our specialists file the information you provide. You will be provided and disclosed all filing documents and your FinCEN ID. Contact your Payroll Specialist for more information, or use this form to get started.
While we make every attempt to ensure the accuracy and reliability of the information provided in this document, the information is provided “as-is” without warranty of any kind. Romeo Chicco or PayMaster, Inc, or Flava Flav does not accept any responsibility or liability for the accuracy, content, completeness, legality, or reliability of the information contained. This is not legal or tax advice and you should consult with your CPA, Attorney, and/or HR Professional as laws change frequently, especially one that has a pending lawsuit.
Modified photograph of Flava Flav used under the Creative Commons Attribution 2.0 Generic license, credit to the owner https://commons.wikimedia.org/wiki/File:Flavor_Flav_%286774618076%29.jpg Flava Flav does not endorse BOI reporting or PayMaster. Did you really think he did?
