Beneficial Ownership Information – Where We Stand Today??

Beginning January 1, 2024, as a requirement of the Corporate Transparency Act of 2022, ALL small business owners with businesses that were created by filing an application with a secretary of state or similar office, or foreign companies registered to do business in the US will have to file what is call a “BOI Report” (Beneficial Ownership Information Report) to U.S. Treasury’s FinCEN (Financial Crimes Enforcement Network) before the end of the year. Included in this requirement are LLCs, LLPs, LLLPs, C-Corps, S-Corps – basically any non-exempt business under 20 employees with less than $5,000,000 in reported gross receipts.

If your company was created before January 1, 2024, you have until December 31, 2024 to file the new report. However, if your business came into being after January 1, 2024, you have only Ninety (90) days in which to file after the business formation date.

A Beneficial Owner is defined as anyone who is either an owner of at least Twenty-five Percent (25%) of the reporting company, or has substantial control over the reporting company, such as a senior officer or director of the reporting company. The information being required is full legal name, address, jurisdiction of formation, IRS tax identification number, birth date and other personal details for all the beneficial owners and anyone who files the application for a business entity formation.

Willful failure to provide the report is punishable by fines of $591 per day, up to $10,000, and two years in prison!

The Corporate Transparency Act was enacted in 2022 as an off-shoot of the Anti-Money Laundering Act of 2020, as amended, and the National Defense Authorization Act of 2021. It’s intended to reduce the number of “shell” companies that are potentially being formed by foreign actors to launder money, evade taxes or engage in other illegal activities and which, to this point, were invisible to the government agencies charged with policing them.

Almost immediately, the law has been challenged by the National Small Business Association (National Small Business United v. Yellen) which filed a lawsuit in Alabama challenging the new law on constitutional grounds. In a decision dated March 1, 2024, the federal district court there held that the Corporate Reporting Act, requiring the Beneficial Ownership Information, was unconstitutional because it exceeded the Constitution’s limits imposed on the legislative branch.

So, what does that mean? This was a very narrow ruling and only applies to you if you were a member of the National Small Business Association before March 1, 2024, you will NOT have to report any beneficial ownership information to FinCEN at this time. However, if you were NOT a member of the National Small Business Association, the ruling DOES NOT apply to you and you should make plans to provide the necessary information or face the penalties.

How do you file this report? You can file the information yourself at the FinCEN efiling portal ( https://boiefiling.fincen.gov ) or have your accountant or tax professional do it for you. See the FAQs page at https://www.fincen.gov/boi-faqs for information on who needs to file and why.