Beneficial Ownership Information Reporting – 2024

New beneficial ownership information (BOI) reporting requirements went into effect January 1, 2024 and will affect many small business taxpayers and individuals who own an LLC. 

The Corporate Transparency Act of 2020 (“CTA”) was enacted into law as part of the National Defense Act for Fiscal Year 2021. The CTA created new reporting requirements relating to the beneficial owners of certain companies doing business in the U.S. The CTA is not a part of the tax code. Instead, it is a part of the Bank Secrecy Act, a set of federal laws that require record-keeping and report filing on certain types of financial transactions.

Beginning January 1, 2024, certain companies must file a BOI report with the Financial Crimes Enforcement Network (FinCEN) to disclose the individuals who ultimately own or control a company. The new rules are intended to prevent the use of anonymous shell companies for illicit activities, such as laundering money or hiding assets, by providing information to national security, intelligence, and law enforcement agencies. This new reporting requirement is expected to affect over 32 million businesses.

Who Must File

Both domestic and foreign reporting companies that are created or registered by filing documents with a secretary of state (SOS) or similar office are subject to the BOI reporting requirements. This includes corporations, limited liability companies (LLCs) or any other entity type.

Entities that are not created by the filing of a document with a secretary of state or similar office are not required to report under the CTA.

Filing Exemptions

There are 23 exemptions from these reporting requirements. Most of these are for entities such as publicly traded companies, financial institutions, insurance companies, securities brokers, and other types of entities that are already required to report ownership information to a governmental authority. 

In addition, certain “large operating entities” are exempt from filing. To qualify for this exemption, the company must:

  • Employ more than 20 full-time employees in the U.S.,
  • Report more than $5,000,000 in gross receipts on the prior year’s tax return, and
  • Have an operating presence at a physical location in the U.S.

For a full list of exemptions, see page 4 of the FinCEN guide (click).

Who is a Beneficial Owner?

Any individual who, directly or indirectly, either:

  • Exercises “substantial control” over a reporting company, or
  • Owns or controls at least 25 percent of the ownership interests of a reporting company.

Individuals have substantial control if they make important decisions about the reporting company’s business, finances, or structure. By default, a company’s senior officers are automatically deemed to have substantial control. Senior officers include the president, chief financial officer, general counsel, chief executive officer, chief operating officer, and any other officer who performs a similar function, regardless of their official title. 

What Information Must Be Reported?

Reporting companies must report the following information: the full name of the reporting company, any trade name or doing business as (DBA) name, business address, state or tribal jurisdiction of formation, and an IRS taxpayer identification number (TIN).

Additionally, information on the beneficial owners of the entity and certain company applicants must be reported including: the name of the individual, birthdate, address, and unique identifying number and issuing jurisdiction from an acceptable identification document (such as a driver’s license or passport), and an image of such document.

When To File

There are different filing timeframes depending on when an entity is registered/formed or if there is a change to the beneficial owner’s information:

  • For existing reporting companies created or registered before 2024, the initial report is due by January 1, 2025.
  • For new reporting companies created or registered after 2023, the initial report is due 30 days after the company’s creation or registration.
  • There is a proposed amendment allowing for new entities created in 2024 only to extend the 30-day timeframe to 90 days. 
  • An updated report must be filed within 30 days when there is a change to previously reported information about the reporting company, its beneficial owners, or the company applicant(s), or when inaccuracies are discovered in previously filed reports.

Understand Your Requirements

Penalties for noncompliance are steep. The fine for willfully failing to complete an initial or updated report or for willfully providing false or fraudulent information to a reporting company is $500 per day, up to $10,000, and imprisonment for up to two years. 

Planning ahead can help you comply and understand your filing obligations. Tideline is here to help assess if you have a BOI reporting requirement and how to meet the reporting obligation. Please contact us to discuss your situation.