Important Updates on Lawsuits and BOI Reporting for Your LLC

Updated 12/4/2024

If you’re a small business owner, you may have heard talk about the new “BOI report.” BOI stands for “Beneficial Ownership Information.” This comes from a law called the Corporate Transparency Act (CTA) signed into law by Congress in 2021.

The CTA is meant to combat illegal activities like money laundering (where criminals hide money from unlawful activities behind business names). Under the Act, certain companies must submit accurate and up-to-date information about their beneficial owners - the people who own or control a legal entity.

This act would (potentially) require certain businesses, including LLCs, to fill out a BOI report to confirm the true owners behind the business. It’s free and easy to complete on the BOI e filing page. 

The government has threatened that Companies who do not comply would face hefty fines and even jail time. 

Heads up: The requirement to file a BOI report has been temporarily blocked by a federal judge… more on this below!

But wait…this new reporting rule may not actually be enforceable?

Things can get wild in the legal world when sweeping laws are introduced. Some people believe the federal government has gone too far. They argue that the federal government is overstepping its power under the Constitution. This is the beauty (and uncertainty) of government “checks and balances” in action. 

On December 3, 2024 (just a few weeks before the reporting deadline of December 31!), a Texas court declared the Corporate Transparency Act unconstitutional. The court blocked the federal government from enforcing the Act anywhere in the country. You can read the full ruling HERE. 

Previously in March 2024, an Alabama court held that the law was unconstitutional and so it wouldn’t apply to the people who sued. However, this new Texas decision applies across the board.

Things are still up in the air, and it will be interesting to see how this all plays out in district or even appellate court. 

Additionally, there has been legislation introduced in Congress that would repeal the Corporate Transparency Act. 

What's for certain is that you can hold off on filing your report.. for now. We will of course update you if this changes. 

If you already filed your BOI report, it’s okay! Just know you don’t have to report for any other businesses you have, or new businesses you create until we have a more definite ruling. 

Stay informed—make sure you sign up below to receive updated information.

Just in case they’re reinstated, here’s what you should know about the BOI reporting requirements. 

Which Companies Need to File the BOI Reporting Form?

Assuming the Corporate Transparency Act holds up in court, the reporting requirement applies to:

• Corporations
• LLCs
• Businesses designated as S-Corps for tax purposes
• Similar entities that are created by filing a document with the state.

Businesses who would NOT required to report:

• Sole proprietorships
• General partnerships
• Dertain trusts,
• Businesses with 20 or more employees and $5 million in receipts, and
• Publicly traded companies 
• Certain financial institutions
• Insurance companies
• Non-profits

Click here for a full list of all exemptions. 

If you are an LLC, this requirement would apply to you. (That is, assuming the recent court decision doesn’t put a final stop to it.) The deadline to file depends on when you created or registered your LLC. 

(For a refresher on the differences between an LLC and sole proprietorship, check out this blog post.)

What to Include in Your BOI Report

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. Depending on the future ruling of the BOI report requirement, businesses could face penalties for non-compliance for non-filing or incomplete filing is $500 per day and up to two years in prison. If you decide to file your BOI report make sure to take the time to ensure your BOI is comprehensive and error-free.

The Legal Paige Take

Business owners across the country were planning on being held to a BOI reporting requirement in 2024. However, this requirement was founded on was struck down by a federal court judge on Dec. 3, 2024. 

So as of this moment, the government cannot enforce the BOI reporting requirement. With lawsuit still underway and pending mother station, it's not totally clear what will happen.

Whatever you do, don't fall prey to scams about filing a BOA reports, especially if they ask for money.

Sign up below to stay informed—compliance requirements could resurface soon, we will send out the latest information as new court rulings come up.

[1] Texas Top Cop Shop, Inc., et al. v. Garland, et al., Case No. 4:24-cv-478 (E.D. Tex.).