We have been getting a lot of questions from clients about the new Beneficial Ownership Information (BOI) Reporting.  For those of you who don’t know, this is a new requirement of the Corporate Transparency Act (CTA).  While the Act was passed a few years ago, the reporting provisions didn’t officially start until January 1, 2024.

What is BOI Reporting and Why Does It Matter?

These rules will apply to most corporations and LLCs formed in the United States.  For entities that existed before January 1, 2024, the deadline to file your initial report is January 1, 2025.  Entities formed after January 1, 2024 have a 90 day window to report after the date of formation.  Entities formed after January 1, 2025 will only have a 30 day window to file their initial report.

Important Deadlines for BOI Reporting

Reports must be updated within 30 days of any changes to previously reported information- name/address change, change in ownership, or change in identification information of the owner (such as a renewed passport or driver’s license).

Who Needs to File a BOI Report?

Each reporting company must submit a report to FinCEN identifying each beneficial owner.  This report consists of four pieces of information.  Domestic reporting companies required to file a BOI Report include corporations, LLCs, or any other entity created by filing a document with a secretary of state or any similar office under the law of a State or Indian tribe.

Exemptions to BOI Reporting Requirements

There are 23 exemptions from the reporting entity definition.  You can view all exemptions here.

Here are 3 key exemptions that may commonly apply to our clients:

1. Tax Exempt entities- Any §501(c) entity, §527(e)(1) political organization, or a trust described in §4947(a)(1) or (2).
2. Large operating companies- Entities that employ more than 20 full time employees in the United States, have a physical office in the United States, and reported mores than $5 million in gross receipts on their last year’s federal income tax return.
3. Inactive entity- Any entity established prior to January 1, 2020, not engaged in active business, not owned by a foreign person, has not changed ownership in the preceding 12 months, has not sent or received funds in an amount greater than $1,000 in the preceding 12 months, and does not otherwise hold any kind of assets.

Any entities dissolved under state law prior to January 1, 2024 are exempt from filing. However, entities formed on or after January 1, 2024 and subsequently dissolved do have to file.

An unincorporated sole proprietor generally does not qualify as a reporting entity.  But, a Single Member LLC filing as a sole proprietor does qualify.

Who Qualifies as a Beneficial Owner?

A beneficial owners is any individual who, directly or indirectly, either exercises substantial control over an entity or owns or controls at least 25% of the ownership interests of the entity.  An individual is considered to exercise substantial control if they serve as a senior officer, has authority over the appointment or removal of senior officers, of has substantial influence over important decisions made by the entity.  FinCEN has provided a guide to determine who has substantial control, which you can view here.

Key Information Required for BOI Reports

The report includes the following: entity’s full legal name, trade or DBA name, complete street address of the principal place of business in the U.S., state of formation, and IRS taxpayer identification number.  In addition, beneficial owner(s) must provide their full legal name, date of birth, complete current address, and a unique identification number from a non-expired U.S. passport, driver’s license, or similar document.

Penalties for Non-Compliance with BOI Reporting

Any person found to willfully provide false or fraudulent information or fails to complete a report is liable for a civil penalty of up to $500 per day (max $10,000), imprisonment, or both.

How to File Your BOI Report

Breaking all of this down, almost all of our clients who own a for-profit corporation or LLC will need to file a BOI report for each entity they own.  And this needs to be done before the end of the year.

If you are ready to file, you can do so using the BOI E-Filing System. If you own multiple LLCs, before you file, you can obtain a FinCEN ID.  This allows an individual to input their beneficial owner information, get a code, and provide that code for each reporting entity.  You can get a FinCEN ID by visiting the FinCEN ID Application for Individuals.

Get Help with BOI Reporting

If you have any questions about your responsibilities to file, please reach out to us.  If you need assistance, Watson & Associates can discuss helping provide the initial filing.  You will be responsible for following up with regard to information changes- most explicitly for updating expired passport or driver’s license info.