LLC New Requirements: Corporate Transparency Act and the Beneficial Ownership Report

Updated 11/13/2024

Here's the ins and outs of the new Beneficial Ownership Information (BOI) filing requirement.

What is a BOI and the Corporate Transparency Act?

Before we get into the nitty gritty of how to report, it is important to understand what you are reporting and why. The Corporate Transparency Act (CTA), signed into law in January 2021, represents a significant shift in the landscape of corporate disclosure and transparency in the United States and affects most business owners. The primary goal of the CTA is to combat money laundering, terrorist financing, shell companies, and other forms of illicit financial activity by requiring certain companies to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).

Under the CTA, companies are obligated to submit accurate and up-to-date information about their beneficial owners. Beneficial Ownership Information refers to detailed data about the individuals who ultimately own or control a legal entity. This information is critical for promoting transparency and preventing illicit financial activities. In the context of the Corporate Transparency Act, the BOI requirements aim to uncover the true owners behind companies.

What Companies Need to File?

The CTA applies to "reporting companies," which are defined as corporations, LLCs (and those designated as S-Corps for tax purposes), or similar entities that are created by filing a document with the state.

Excluded from the CTA are the following businesses: 

• Sole proprietorships, general partnerships and certain trusts,
• Businesses with 20 or more employees and $5 million in receipts, and
• Publicly traded companies, certain financial institutions, insurance companies, non-profits, among others. 

Click here for a full list of all exemptions. 

Thus, IF YOU ARE AN LLC THIS REPORTING REQUIREMENT APPLIES TO YOU! It just depends on when you became an LLC.

Here are the following reporting deadlines: 

• Entities formed before January 1, 2024 have until December 31, 2024 to file the BOI → Meaning if you registered your LLC in your state before 2024, you have 12 months to report

• Entities formed after January 1, 2024 have 90 days to file the BOI after formation → Meaning if you register your LLC in your state in 2024 or anytime thereafter, you have 90 days to also report your LLC to the federal government through this BOI reporting requirement

What to Include in Your BOI

When filing your BOI, you need to provide details about the individuals who qualify as beneficial owners. These are individuals who directly or indirectly control the entity and enjoy over 25% of the economic benefits of its existence. Most LLC owners fall under this category. You will be filing under the federal database called Beneficial Ownership Secure System (“BOSS”) on the FinCen website. Despite what some information out there may be telling you, there is NO FEE to file! Additionally, you or your accountant can file this as it's a simple form. Alas, don't fall prey to a scam company that is going to charge you to file this or tell you that it’s complicated and you need outside help to do this.   

The key information you will need to file for each beneficial owner is:

1. Full Legal Name: The complete legal name of the beneficial owner.
2. Date of Birth: The birthdate of the beneficial owner.
3. Current Residential or Business Address: The address where the beneficial owner can be contacted.
4. Identification Number: This could be a driver's license number or a passport number.
5. The Nature and Extent of Ownership: Specify the percentage of ownership or control each beneficial owner holds in the reporting company.

Remember, accuracy and completeness are crucial as penalties for non-compliance for non-filing or incomplete filing is $500 per day and up to two years in prison. Make sure to take the time to ensure your BOI is comprehensive and error-free.

Recently, federal courts have declared this law unconstitutional... so is reporting paused?

While the Corporate Transparency Act was declared unconstitutional by an Alabama District Court, many business owners mistakenly believe this halts all BOI reporting requirements nationwide. However, this is not entirely true. The government has already appealed the decision, meaning the appellate court will review it, and federal reporting requirements may still apply in the meantime.

This legal uncertainty underscores the importance of staying informed and prepared. Business owners should proceed cautiously, assuming that reporting could still be required.

For a better understanding into this case and its implications for your business, as well as practical BOI filing tips, make sure to watch our recent free webinar linked below. We've got you covered with all the information you need to stay compliant and protect your business!

And, when you sign up you'll get a FREE step-by-step tutorial on how to file the report yourself!