Businesses Beware! You have to File a Beneficial Ownership Information Report to the United States Financial Crimes Enforcement Network
BAD NEWS:
The Corporate Transparency Act requires you to file more government paperwork. The paperwork is not a tax return! It is a Beneficial Ownership Information Report (“BOI”). Your BOI Report has to be electronically filed with the United States Financial Crimes Enforcement Network. If you don’t file it, you face a $ 500-a-day Civil Penalty. You also could face criminal charges and imprisonment for up to two years and a fine up to $10,000.
What is the deadline to get it filed?
Companies that exist as of January 1, 2024, must file their BOI report no later than January 1, 2025.
Companies created or registered to do business in the U.S. after January 1, 2024, must file an initial BOI Report within 90 days after receiving actual or public notice that its creation or registration is effective. If notice is provided both by actual and public notice, the clock starts ticking on the 90-day deadline on the earlier of the two dates notice is received.
Who Exactly Does this apply to?
The Corporate Transparency Act requires most corporations, LLCs, and similar entities created in or registered in to do business in the United States to report information about their beneficial owners. There are two categories of reporting companies:
- a “domestic reporting company” and
- a ‘foreign reporting company.”
A “domestic reporting company” is a corporation, limited liability company (“LLC), or other entity created by the filing a document with the Secretary of State (ex. Indiana Secretary of State) or any similar office under the law of a state or Indian tribe. A “foreign reporting company” is an entity formed under the law of a foreign county that is registered to do business in any state or tribal jurisdiction by the filing of a document with a Secretary of State or any similar office.
Who are the Beneficial Owners of My Company?
Any individual who, directly or indirectly:
Exercises substantial control over a reporting company, or
Owns or controls at least 25 % of the ownership interest of a reporting company.
What is Substantial Control over a Reporting company?
The Financial Crimes Enforcement Network identified a range of activities that may constitute substantial control of the reporting company. Anyone who can make important decisions for the entity (company, LLC, etc.) has substantial control. That includes corporation officers, board members, and anyone with the authority to appoint or remove either group, stockholders, members, nominees, custodians, intermediary entity owners, and other owners. They would likely be people to have substantial control.
Rule of Thumb: If in doubt, report it!
BIG TRAP: As the law currently stands, you must make a new report within 30 days of ANY CHANGE to the company’s required information or its beneficial owners. An updated BOI Report must be filed when there is any change. The same rule applies to changes in the information submitted by an individual to obtain a FinCEN identifier.
Why was this law passed?
The U.S. government has documented in the past that criminals used legal entities to purchase real estate, conduct wire transfers, and create the appearance of legitimacy when dealing with counter parties such as financial institutions and control legitimate businesses for ultimately illicit ends. So, Congress passed the law to better enable national security agencies and law enforcement to fight money laundering, terrorism, and other illicit activities by creating this national registry of beneficial ownership for reporting companies. (There are entity exemptions where they have other reporting requirements, such as a bank or tax-exempt entity.)
Need Help?
Mistakes by businesses with this new law can be very costly. By working with a tax lawyer, you can gain access to vital information needed to run a business. You can gain access to the knowledge, skill, and ability by hiring a tax lawyer. Time is of the essence in meeting the filing requirement of BOI reports. Call us, at 317-635-4010 if you need help complying with this new legal requirement.
