What Business Owners Need to Know About Beneficial Ownership Information (BOI) Reporting

Tynisa (Ty) Gaines
ByTynisa (Ty) Gaines, EAReviewed byAlex MilesUpdated on May 20, 2024 · minute read
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  • The Corporate Transparency Act (CTA), effective from January 1, 2024, significantly changes business reporting requirements in the US. Most LLCs will be required to file a new Beneficial Ownership Information (BOI) report beginning in 2024.

  • Note that as of March, 2024, a federal district court early deemed the CTA unconstitutional, putting a halt to BOI reporting requirements.

Corporate Transparency Act in limbo after court ruling

In a surprising move, a federal district court early in 2024 deemed the Corporate Transparency Act (CTA) unconstitutional, putting a halt to Beneficial Ownership Information (BOI) reporting requirements. Enacted on January 1, 2021, as part of the 2021 National Defense Authorization Act, the CTA aimed to combat money laundering and tax evasion by mandating new reporting standards for certain US businesses.

The National Small Business Association, a non-profit from Ohio, challenged the CTA in 2022, alleging that its disclosure requirements exceeded Congress’ authority under the Constitution and violated several constitutional amendments.District Court Judge Liles C. Burke’s recent ruling granted the plaintiff’s motion for summary judgment, declaring the CTA an unconstitutional exercise of Congress’ powers. This decision has left the CTA and BOI reporting landscape uncertain, with further developments expected in the future.

Stay updated for the latest news on this case. Meantime, here's information about what the CTA required in terms of BOI reporting.

What is the Corporate Transparency Act?

The Corporate Transparency Act, part of Title 31 (Money and Finance) of the US Code, was enacted in 2021 with the primary goal of preventing money laundering and enhancing transparency in corporate ownership.

To file your report beginning January 1st, 2024, visit the official FinCEN website. Here is further information about who needs to file, who is exempt, deadlines, and more.

Who needs to file BOI reports?

All entities, including those registered in all 50 states, territories, and US possessions, are required to file BOI reports. This includes limited liability companies (LLCs), corporations, and limited liability partnerships (LLPs). Foreign companies that register with the Secretary of State are also subject to these requirements.

BOI reporting exemptions

The CTA outlines 23 exemptions:

  1. Securities reporting issuer

  2. Governmental authority

  3. Bank

  4. Credit union

  5. Depository institution holding company

  6. Money services business

  7. Broker or dealer in securities

  8. Securities exchange or clearing agency

  9. Other Exchange Act registered entity

  10. Investment company or investment adviser

  11. Venture capital fund adviser

  12. Insurance company

  13. State-licensed insurance producer

  14. Commodity Exchange Act registered entity

  15. Accounting firm

  16. Public utility

  17. Financial market utility

  18. Pooled investment vehicle

  19. Tax-exempt entity

  20. Entity assisting a tax-exempt entity

  21. Large operating company

  22. Subsidiary of certain exempt entities

  23. Inactive entity

Defining inactive entities for exemption

Inactive companies are exempt from BOI reporting if they meet the following requirements:

  1. Must have been in existence on or before January 1, 2020.

  2. Is not engaged in an active business.

  3. Is not owned by a foreign person.

  4. Has not experienced a change in ownership in the preceding 12-month period.

  5. Has not sent or received funds in an amount greater than $1,000 in the preceding 12-month period.

  6. Does not hold any type of assets, domestic or foreign.

Defining large operating companies

Large operating companies that meet the criteria of employing 20 full-time employees, show $5 million in gross receipts or sales, and have a physical office in the US, are exempt from the BOI reporting requirements.

How to determine beneficial owners

Individuals who own more than 25% or have substantial control over a company, including senior officers with authority over company matters, are considered beneficial owners.

Reporting company information

Entities must provide detailed information, including their full legal name, any trade or "doing business as" names, principal place of business address, state or tribal jurisdiction of formation, and Employer Identification Number (EIN).

Beneficial owner and applicant information

For each beneficial owner and applicant, the required information includes full legal name, date of birth, residential street address, and a unique identifying number from an accepted identification document.

Filing deadlines and updates

The initial BOI report is due by December 31, 2024, for entities created before January 1, 2024. Post this date, reports are due within 90 days after entity creation, with updates or corrections required within 30 days.

Penalties for non-compliance

Entities failing to file BOI reports may face penalties of $500 per day, up to a maximum of $10,000.

For current and comprehensive information about the new BOI requirements and to file your report beginning January 1st, 2024, visit the official FinCEN website.

Beneficial Ownership Information (BOI) reporting FAQs

Here are answers to frequently asked questions about BOI reporting.

Are there exemptions from BOI reporting requirements?

Yes, the CTA outlines 23 exemptions, including governmental authorities, banks, credit unions, and certain inactive entities. Large operating companies meeting specific criteria are also exempt.

How are beneficial owners defined, and what information is required for reporting?

Beneficial owners own more than 25% or have substantial control over a company. Required information for reporting includes their full legal name, date of birth, residential address, and unique identifying number from an accepted ID document.

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Tynisa (Ty) Gaines
Tynisa (Ty) GainesTax Expert at TokenTax
Tynisa (Ty) Gaines, EA has more than 20 years of experience as a tax professional. Ty has published numerous tax articles, two tax e-books, and an academic publication on cryptocurrency for the National Income Tax Workbook.
Alex Miles
Reviewed byAlex MilesCo-Founder at TokenTax
Prior to TokenTax, Alex worked as a Product Designer at Dropbox and before that Readmill (acquired by Dropbox). He holds a BS in Digital Information Design - Interactive Media from Winthrop University.

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