Beneficial Ownership Information Reporting

***This post is for information only and should not be considered advice or guidance in any way****

The Beneficial Ownership Information (BOI) Reporting requirement is new for 2024 but still something that many business owners and professionals do not fully understand. In 2021 the Corporate Transparency Act (CTA) was passed with the intended goal of providing more information to the government to catch money laundering and illegal acts. The solution, in part, is the BOI filing that requires what amounts to all small businesses to report who owns a company, or controls the actions, directly or indirectly. 

For any business created prior to 1/1/2024 you have all of calendar year 2024 to file your initial BOI report (if required).

For those entities created after 12/31/2023, but prior to 1/1/2025 the government gives you 90 days to complete this same report.

In 2025 this changes to 30 days. 

What is the BOI and who needs to be reported?

In simple terms, the BOI reports to the government who the business owners are, as well as those who have significant influence over the business. An example of this may be a former owner who has sway over the operations of an entity, but holds no formal ownership. They would be considered a Beneficial Owner, potentially.

There is also an indirect ownership condition, which might include the spouse or family members of a direct owner. For example, with an LLC if there are 10 owners at 10% each, but all are related, the LLC would report each owner having 100% total direct/indirect ownership.

This also raises the question of who needs to be reported on the BOI. 

This starts to turn into a slippery slope of reporting, and the Government has instituted penalties that can be assessed at $591 for each day that a violation continues. Others start at $10,000 and any person who, without authorization, knowingly discloses or uses BOI may also be fined up to $250,000, or face prison time of up to 5 years, or both. 

Do I have to file? 

As of today, the requirement is still in place. On March 1, 2024 the Department of Justice filed an appeal to overturn the ruling in National Small Business United v Yellen which found the BOI requirement to be unconstitutional. If upheld, the entire BOI filing will be thrown out, potentially. This brings in questions for those businesses who did file, and paid someone to file for them, of if they are owed any refunds. Can you go after those third parties who told you that you had to file now? 

Then we have the scammers who are sending out documents requesting BOI information to file on your behalf that make it look like it's an actual IRS form. 

As a general rule, we strongly urge all businesses to only use firms they personally know and deal with regarding the BOI to help avoid fraud.

How do I file?

The government has setup a website at https://fincen.gov/boi to collect all filings. When our firm reached out to inquire how someone would file if they did not have internet access, or did not have a photo ID due to religious reasons, we were told by the fine support staff at fincen.gov to file online through their site. Clearly, they didn't read the question. 

This does however bring up the issue of certain members of religious groups who do not have photo ID's, or others who do not have them. The Amish community for example, have limited or no internet access, and many do not have photo ID's, but do own businesses. This reporting requirement is difficult for them to execute as a result. 

I have a business started in 2024, what do I do?

Our suggestion is to contact your lawyer that you used to setup your organization and work through them.

If you filed everything through an online company, then reach out to a lawyer and have them help you (and review what was filed). 

If your Accountant is filing this for you, make sure you have an engagement letter that clarifies their role and yours. Do they address that you are responsible for all information, or do they take responsibility? That is who would potentially owe a penalty, if due.

In summary, we do not see a downside to any businesses waiting to file this report, assuming they qualify for the 2024 deadline. We also do not see an upside to filing this report now, especially if it means hiring a third-party to do the report for you. The requirements and wording are somewhat vague and bring more questions than answers to the point if you make an error and do not report someone the penalties are enough to drive most businesses, out of business. 

For those who have hired a third-party, we strongly encourage those companies to inquire about refunds if this is ruled unconstitutional. 

The penalties in place even reach professionals such as CPA's for simply NOT informing their clients of this requirement. Many states have not ruled if assisting with this filing is considered practicing law, which raises a whole other set of issues.

All in all, our firm is attempting to educate business owners about where to find answers, what options are out there, and what the basic requirement is. Past that, the government has created what we believe to be a reporting requirement that is setup to see businesses fail to properly report and have exposure to financial penalties that have the potential to put them out of business.