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Some LLC and other corporate business owners may not be aware of a new law requiring them to file what is called a Beneficial Ownership Information (BOI) report by the end of this year (2024). There are stiff fines and penalties if the form is not filed, so spread the word around to anyone you know who falls under this new law to make sure they are aware of it. Failure to file may become extremely costly, with civil penalties starting at $500 per day and criminal penalties of up to $10,000 and/or two years in prison.

As of January 1, 2024, entities with 20 or fewer employees or less than $5 million in annual gross sales may be required to submit a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCen). The Financial Crimes Enforcement Network (FinCEN) is a bureau within the United States Department of the Treasury that collects and analyzes information about financial transactions to combat domestic and international money laundering, terrorist financing, and other financial crimes. The new beneficial ownership reporting guidelines took effect on January 1, 2024 as part of the Corporate Transparency Act (CTA). Going forward, many small business entities must report beneficial owners to FinCEN or risk penalties and fines.

As the name implies, a Beneficial Ownership Information report (BOI report) generally provides details about the owner(s) and individuals who control a company. The Corporate Transparency Act (CTA) was passed as part of the Anti-Money Laundering Act in 2021 by Congress to help law enforcement flag and respond to financial crimes. This bill mandates many businesses to file a beneficial ownership information report to the Financial Crimes Enforcement Network (FinCEN). The stated purpose of this new requirement is to prevent malicious individuals from hiding their identities through the use of shell companies.

According to the Department of Treasury Financial Crimes Enforcement Network, "The principal purpose of this collection of information is to generate a database of information that is highly useful in facilitating national security, intelligence, and law enforcement activities, as well as compliance with anti-money laundering, countering the financing of terrorism, and customer due diligence requirements under applicable law. The provision of that information is mandatory and failure to provide that information may result in criminal and civil penalties."

This new requirement applies to corporations, LLCs, limited partnerships, and limited liability partnerships (LLPs), Foreign businesses that make a filing with any state are also subject to the CTA. Sole proprietors and general partnerships, which are businesses that are not created by registering with any state, are not subject to the CTA.

There are two main categories of business entities that are exempt from Corporate Transparency Act (CTA) requirements.
- Federally regulated business entities, such as financial institutions, publicly traded companies, and insurance companies
- Large business entities with at least 20 full-time employees, over $5 million in gross receipts, and a substantial U.S. presence

Every LLC created in the USA will have to file a BOI report unless it qualifies for an exemption. Any corporation created by filing with a state or tribal jurisdiction in the U.S. must file. As of January 1, 2024, entities with 20 or fewer employees or less than $5 million in annual gross sales may be required to submit a BOI report.

Who is considered a Beneficial Owner:
- Any individual that owns a minimum of 25% of the legal entity.
- Any individual that holds a significant ability to control, manage, or direct the legal entity.
- Any trust that owns a minimum of 25% of the legal entity.

The business is required to submit an electronic form that includes the following information:
- A name, address, birth date, and a unique ID number for each beneficial owner
- A unique ID number could be a driver’s license number or passport number
- The unique ID may not be the owner’s social security number
- A name, address, registered agent, and tax ID number for the business
- Type of BOI filing (initial filing, correction, or update)

When the Beneficial Ownership Information report is due depends on when you formed your entity. For entities created before January 1, 2024, the report is due by January 1, 2025. No reports were accepted prior to January 1, 2024. For businesses created on or after January 1, 2024, the report is due within 90 days from the time the business receives notice that its registration is effective by the state.

BOI reports are filed electronically through a secure filing system available via FinCEN's BOI E-Filing website (https://boiefiling.fincen.gov). The system provides a confirmation of receipt once a report is successfully filed. There are two ways to file the BOIR: (1) upload a completed PDF or (2) complete the webform. Printed versions of the BOI reporting form is not for submission and will not be processed by FinCEN. There is NO fee to file BOI directly with FinCEN-it’s free (don’t be tricked by companies trying to charge fees to file for you).

There is also no annual reporting requirement for the BOI. Reporting companies must file an initial BOI report and corrected or updated BOI reports as needed.

Here’s the government website again for more information: https://boiefiling.fincen.gov