NEW filing requirement in 2024
January 5, 2024
To our Clients and Friends,
We want to make you aware of a NEW filing requirement in 2024. The Corporate Transparency Act (CTA), signed into law on 1/1/21, expanded anti-money laundering laws and created new reporting requirements for certain companies doing business in the U.S. Beginning in 2024, many small businesses will be required to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), through a secure filing system on that website, creating a database for national security and law enforcement agencies to prevent the use of shell companies for criminal activity.
FinCEN expects that many, if not most, reporting companies will be able to submit this report on their own, using guidance issued. The initial report for entities created prior to January 1, 2024, is not due until January 1, 2025. Because reporting is not required until later this year and because we anticipate updated guidance on the reporting requirements, SJHL will not be preparing these forms as part of our annual tax preparation engagement. We anticipate being able to assist with this reporting later this year under a separate BOI filing engagement, with its own fee. However, it is possible that SJHL will not be able to assist with this filing if the information to be reported arises from determinations that are primarily legal in nature and our assistance would be considered the unauthorized practice of law. In those cases, we will advise you to consult with your attorney. We will review each case individually to determine the level of assistance we can provide. At this time, we want to make you aware of these new BOI reporting requirements.
Do Beneficial Ownership Interest (BOI) Reporting Requirements Affect ME?
Required to File New Report
- Corporations, including S-corps
- LLCs, including Single-Member LLCs
- Other entities formed through Secretary of State
Exempt from Filing New Report
- Sole Proprietorships* (unless a single-member LLC)
- Trusts (most are exempt)
- General Partnerships
- Large Operating Companies which already report BOI
- Banks, Insurance Companies, Certain Tax-exempt or Inactive Entities
- Beneficial Owners*
- Company Applicants* (for entities formed after 2023)
What (all items below)
- Full Legal Name
- Date of Birth
- Street Address
- Unique ID (passport, driver’s license, or other state ID number) and a copy of the document
- Existing Entities – Initial report due 01.01.2025
- Change of Information* after an initial report is filed – due within 30 days of any change
- New entities in 2024 – Initial report due within 90 days of registration at SoS
- New entities after 2024 – Initial report due within 30 days of registration at S0S
FinCEN began accepting electronic filings of these reports on January 1, 2024. More detailed information can be found on the FinCEN website: https://www.fincen.gov/boi and in the enclosure.
*see below for more information
Swindoll, Janzen, Hawk & Loyd, LLC
Certified Public Accountants
P.S. Penalties for willfully failing to file both initial and updated BOI reports are steep—$500 per day that the report is late, up to $10,000, and imprisonment for up to two years. Thus, it is imperative we educate ourselves about these requirements, and timely comply.
Who Must File. Domestic and foreign reporting companies are required to file reports. A company is considered a reporting company if a document was filed with the secretary of state (SOS) or similar office to create or register that entity. Corporations (including S corporations), LLCs, and other entities formed through the SOS are subject to the reporting requirements. Sole proprietorships (unless organized as a Single-Member LLC,) trusts, and general partnerships do not require the filing of a formal document with the SOS, thus are not considered a reporting company and will not have a filing requirement.
Some companies are exempt from reporting (such as banks, insurance companies and certain tax-exempt or inactive entities), but many of the exempted companies are already required to report ownership information to a governmental authority. Companies which meet all of the following criteria are exempt from the new reporting requirement:
- more than 20 full-time U.S. employees
- an operating presence at a physical office within the U.S.
- more than $5,000,000 of U.S.-sourced gross receipts reported on its prior year federal income tax return
Information To Be Provided. Beneficial ownership information (BOI) must be reported for the reporting company’s beneficial owners and (for entities formed or registered after 2023) company applicants. BOI includes:
- Individual’s full legal name
- Date of birth
- Street address
- Unique ID number (nonexpired U.S. passport, state driver’s license, or other government-issued ID card)
- A copy of the document showing the unique ID number
Beneficial Owners. Two groups of individuals are considered beneficial owners of a reporting company:
- any individual who exercises substantial control over the reporting company
- any individual who directly or indirectly owns or controls at least 25% of the ownership interests of the reporting company
Individuals with substantial control are those with substantial influence over important decisions made by the reporting company. Senior officers (president, CFO, general counsel, CEO, COO, and any other officer who performs a similar function) are automatically deemed to have substantial control, as are individuals with the authority to appoint or remove senior officers and board members. There is no requirement that these individuals have actual ownership in the company to be considered a beneficial owner for reporting purposes. By this definition, the number of beneficial owners for whom you are required to submit all of this information could be substantial.
Company Applicants. The company applicant is the person who actually files the document that creates or registers the reporting company (e.g., an attorney). Company applicants must provide the same information required of beneficial owners if the reporting company is formed or registered after 2023. Reporting companies formed or registered before 2024 are not required to supply BOI for company applicants.
Important Filing Dates. For existing reporting companies created or registered before 2024, the initial report is due by 1/1/25. For reporting companies created or registered in 2024, the initial report is due 90 calendar days after the entity’s creation or registration. New companies formed after 2024 will be required to report within 30 days. FinCEN is in the process of creating a secure electronic filing system via their website and began accepting these reports on 1/1/24.
Reporting Changes. Changes to previously reported information about the reporting company or its beneficial owners, an updated report must be filed within 30 days of the change. It is imperative that businesses develop a system to ensure filings are reported promptly when the company experiences changes in ownership or personnel, for example, a change of address or name change of any beneficial owner.