BOI Reporting | Critical Information for Business Owners

What Is BOI Reporting?

Starting in 2024, the Corporate Transparency Act requires certain businesses to file a Beneficial Ownership Information report (BOI). Many small business owners are unaware of this new law and their related responsibilities. Failure to comply can result in significant fines and penalties, so make sure you’re aware of your requirements.

What’s the Purpose of It?

You may not be aware, but the United States is a haven for money laundering. BOI reporting is an attempt to crack down on anonymous shell companies, and so the government wants to know who the actual individuals behind the entity are. This is known as the beneficial owner. A beneficial owner is an individual who either directly or indirectly exercises substantial control over the reporting company OR who owns or controls at least 25% of the reporting company’s ownership interests.

Who Does This Affect?

Most corporations, limited liability companies (LLCs), limited partnerships, and certain other entities are subject to the filing requirements. This includes LLCs that are taxed as disregarded entities (Schedule C, E, F). Generally, sole proprietors and general partnerships are exempt, but single-member LLCs are included. Larger and regulated businesses (entities with more than 20 employees and $5 million in revenue), along with government-regulated businesses, are exempt. Non-profit organizations are also exempt from this.

What Does BOI Reporting Involve?

You must provide the individual’s full legal name; date of birth; complete current address; and a unique identification number and issuing jurisdiction from a non-expired U.S. passport, state driver’s license, other state, local, or tribal identification document, or foreign passport if nothing else is available (along with an image of the document).

For new entities, you must provide the company applicant information. For a domestic reporting company, the company applicant refers to the person who personally submits the document that establishes the company. In the case of a foreign reporting company, it is the person who personally submits the document that initially registers the company. Additionally, for both domestic and foreign reporting companies, if the filing involves multiple individuals, the company applicant is the person mainly in charge of overseeing or managing the filing process.

What’s the Deadline?

For entities in existence before January 1, 2024, you have until January 1, 2025 to file your initial report. For entities formed on or after January 1, 2024, you have 90 days to file your initial report (this was recently extended from 30 days).

While there is no yearly filing requirement, certain changes require an updated report. If there is any change to the information reported for the reporting company—such as registering a new business name, a change in beneficial owners, or an address change for the business or beneficial owners—an update is required within 30 days.

What Are the Penalties for Non-compliance?

The penalties for non-compliance are stiff, so it’s important to understand your legal responsibilities and to work with a qualified professional who understands BOI reporting requirements. Any person who willfully provides, or attempts to provide, false or fraudulent beneficial ownership information, including a false or fraudulent identifying photograph or document, or fails to report complete or updated beneficial ownership information is liable for a civil penalty of no more than $591 per day, a fine of up to $10,000 and up to two years imprisonment. It is important to note that the law says willfully.

What’s My First Step?

Understand your responsibilities to adhere to this new law—this is critical. If you are looking for expert tax guidance, please book a discovery call with The Youngblood Group today.

____________________________________________________

A postscript - BOI in the News

If you’ve been watching the news, you may have seen the headline “Corporate Transparency Act Ruled Unconstitutional.” A recent Alabama court ruling (National Small Business United v. Yellen, No. 5:22-cv-01448) concluded that the Corporate Transparency Act exceeds the Constitution’s limits on Congress’s power and enjoined the Department of the Treasury from enforcing the Corporate Transparency Act against the plaintiffs. As a result, the government is not currently enforcing the Corporate Transparency Act against the plaintiffs in that action. This does not apply to others, and this has been appealed.

Written by Josh Youngblood, owner of The Youngblood Group