Oh BOI!
As we move closer to the new year, it's important for businesses to stay informed about changes that go into effect in 2024. One of these changes is part of the Corporate Transparency Act (CTA), which creates the requirement for filing Beneficial Ownership Reports (BOI). The filing of these reports is a service that we will be providing to our clients.
Who is affected by this?
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.
Filing Deadlines for Beneficial Owner Information Report (BOI Report)
Start Date for Filing: Reports can be submitted starting January 1, 2024.
For Existing Entities (Before January 1, 2024): Entities created or registered before January 1, 2024, have until January 1, 2025, to file their initial BOI reports.
For New Entities (Between January 1, 2024, and December 31, 2024): Entities created or registered during this period have 90 calendar days from the earlier of actual notice or public notice of their creation/registration to file their initial BOI reports.
For Entities Created On or After January 1, 2025: These entities must file their initial BOI reports within 90 calendar days of actual or public notice of their creation or registration.
Beneficial Ownership Secure System (BOSS)
FinCEN's BOSS will manage BOI data, aiming to prevent illicit activities involving anonymous shell companies.
BOI reports will not be accessible to the public.
Penalties for Non-Compliance
Non-compliance can lead to significant fines and potential criminal charges. The willful failure to report complete or updated beneficial ownership information to FinCEN, or an attempt to provide false or fraudulent beneficial ownership information may result in a civil penalty of up to $591 per day (indexed to inflation) or criminal penalties, including imprisonment of up to two years and/or a fine of $10,000.
This introduces significant changes for many businesses in terms of transparency and reporting. Entities must understand these new requirements and prepare accordingly to meet the specified deadlines and avoid penalties.
Anytime you form a new entity, you should work with a tax professional and ensure you have an actual need to form the entity. In a previous post, I wrote about whether you need an LLC. It is important to consider the compliance costs of having an entity.
