Beneficial Ownership Information reporting requirement has Stiff Penalties for NonCompliance

Starting January 1, 2024 a new mandatory ownership reporting requirement for small businesses (corporations, partnerships and LLC’s) was instituted.

Three years earlier, in 2021, Congress passed the Corporate Transparency Act on a bipartisan basis. This law created a new Beneficial Ownership Information (BOI) reporting requirement as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.

Under this law, small corporations and LLC’s are required to provide to the Financial Crimes Enforcement Network (FinCEN) information on all “beneficial owners.”

A beneficial owner is any individual who owns or controls at least 25 percent of the ownership interests of a company OR individuals who directly or indirectly “exercise substantial control” even if they are not actual owners.

Initial Reporting –

• Starting January 1, 2024, FinCEN began accepting Beneficial Ownership Information (BOI) reports for businesses formed before 2024.
• Companies started during 2024 have 90-days to submit BOI initial report and documentation.
• Companies started after January 1, 2025, will have 30-calendar days to file their initial BOI reports.
• Required information for the business includes full legal name, all DBA’s, EIN, the business’s physical address.
• Required information for ALL beneficial owners includes legal name, date of birth, current residential address, driver’s license number (or passport) and an image of the ID being used.

Updated Reports –

BOI is not an annual report. However, if any of the reported information changes  an Updated Report Form and supporting document must be submitted within 30 days of the change.

Changes such as: new DBA, new physical addresses for the business, new or removing beneficial owners, changes to any beneficial owners name, addresses, or ID numbers.

Note: There is no requirement to report a company’s termination or dissolution.

Exclusions –

The only excluded restaurants would be ones with 20 or more full-time employees and more than $5 million in sales the prior year.

“Inactive entities” are also excluded if a business ceased to conduct business and formally dissolved before January 1, 2024.

If the dissolution process was not complete before 1/1/2024, there IS STILL a BOI requirement.

Penalties-

Penalties may be imposed on the entity and any person who causes the failure.

Again, this is not an annual report. After the initial report, only changes need to be made but they must be made very promptly to avoid outrageous penalties.