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

Updated 3/5/2024

Attention Business Owners! The Corporate Transparency Act was recently declared unconstitutional by an Alabama District Court. This means that reporting is not required right now until the case is sorted out in federal court. An appeal is likely from the government which means an appellate court will then review the lower court's decision. The Legal Paige will keep you apprised of this case, but for now just know that BOI reporting is on pause.

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.

Again, the link to file your BOI is HERE! 

Below is a step-by-step tutorial on how to file the report: 

   

Now that you know exactly what a BOI is and how you can file it you are ready to enter into the new fiscal year like a pro!

If you need a little extra help with this new reporting requirement and preparing for your upcoming tax year make sure you talk to your lawyer, or a CPA or bookkeeper. Get access to TLP’s recommended CPA & Bookkeeper list HERE!