Required FinCEN Beneficial Owner Information Reporting
October 31, 2023
We wanted to inform you of significant changes in federal reporting requirements that may impact your business. Starting January 1, 2024, the 2021 Corporate Transparency Act will require certain domestic corporations, limited liability companies (LLCs), limited partnerships, limited liability partnerships, and business trusts (i.e. ‘Reporting Company’) to report ‘beneficial ownership’ information to the U.S. Treasury’s FinCEN. These reporting requirements are not filed annually and do not generate any tax liability. These are information-only filings. An initial Beneficial Ownership Information (BOI) report is required from all covered entities and updated reports need only be filed if the information that was provided on the original report has changed.
This move is a component of the federal government’s multi-pronged strategy to combat money laundering and tax evasion. Unfortunately, this will introduce onerous reporting requirement burdens on many businesses. Willfully neglecting to report required information or update changes in a timely manner may lead to severe consequences including substantial fines of up to $500 per day until the violation is rectified. In more severe cases, individuals may face criminal charges with penalties of up to $10,000 and/or imprisonment for up to two years.
A ‘Reporting Company’ includes any domestic corporation, LLC (including Single Member LLC’s), Limited partnerships, Limited Liability Partnerships, and Business Trusts. There are 23 exemptions a company can meet that would eliminate the need to file these new Beneficial Ownership Information reports, which includes an exemption for entities with more than 20 full-time employees, with more than $5,000,000 in gross receipts or sales. For more detail on who would be considered a ‘Reporting Company’ and what the exemptions are, please refer to our full article here.
‘Beneficial owners’ include those who directly or indirectly possess 25% or more of the entity’s ownership interests OR exercise substantial control over the reporting company. This could include senior officers, board members, and other key decision makers.
Entities established on or after January 1, 2024 must file the report within 30 days of their formation. For entities that were formed before January 1, 2024, they must file their initial BOI report by January 1, 2025. Should any of the information reported on an initially filed BOI report change, the reporting entity must file an updated report within 30 days of the change.
If you have any questions or concerns, please do not hesitate to reach out to your tax engagement team.
Gatto, Pope & Walwick, LLP
Certified Public Accountants