New "BOI" Reporting Requirements

What’s the Corporate Transparency Act (CTA)?

Congress enacted the Corporate Transparency Act (CTA) in 2021 to help prevent the use of anonymous shell companies for money laundering, tax evasion, and other illegal purposes. Currently, most states allow corporations, LLCs, and other business entities to be established without revealing the identities of the true owners. The CTA puts an end to those hidden identities.

The CTA requires businesses to file a Beneficial Owner Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN), listing the names and contact information of the human beings who own or control the company. This information will be placed in a FinCEN database for use by federal, state, and foreign law enforcement; the IRS; national security agencies; and financial institutions (in order to meet their due diligence requirements, but only with the consent of the company involved).

This database will not be available to the public. For example, private creditors can’t access it to collect debts against the owners of LLCs and corporations. And it will contain no financial information.

Is Your Business or Rental Property Subject to the CTA?

The CTA primarily applies to smaller businesses that are not already heavily regulated by the government. The basic rule is that the CTA applies to businesses that are formed by filing a document such as articles of incorporation or organization with a state Secretary of State office or similar official. This includes:

    • Limited Liability Companies (LLCs),
    • Corporations,
    • Limited Partnerships (in most states), and
    • Limited Liability Partnerships.

The CTA does not apply to sole proprietors because no document needs be filed to legally establish a sole proprietorship. You simply start a business you own yourself.

But the CTA does apply to single-member LLCs even though they are taxed as sole proprietors (“disregarded entities”). The reason: if you form a single-member LLC, you file a document (usually called “articles of organization”) with your state’s Secretary of State.

The CTA also does not apply to general partnerships except in a few states such as Delaware, where general partnerships must make a state filing to come into existence. Such a filing is optional for California general partnerships—but if one is filed, a BOI report must also be filed.

The CTA also applies to foreign corporations, LLCs, and other entities that register to do business in the U.S. The foreign business entity filing is ordinarily done by filing a document with the state Secretary of State.

What are the Penalties for Non-Compliance?

To make sure you are paying attention, the government has put in place severe penalties for non-compliance:
Civil penalties of up to $500 for each day that a violation continues, capped at $10,000.

Potential criminal penalties, including imprisonment for up to two years for any person who willfully(a) provides, or attempts to provide, false or fraudulent beneficial ownership information, or (b) fails to report complete or updated beneficial ownership information to FinCEN.

What is the Deadline for BOI filling?

Companies created or registered in 2024 will now have 90 days after they’re formed, up from the previous 30 days, to report their “Beneficial Ownership Information (BOI) to Treasury’s Financial Crimes Enforcement Network, or FinCEN. Pre-existing companies still have a year after the new requirements take effect Jan. 1 to file their initial reports.

What Should I Do and How Do I File it?

If you are a Business or Personal CFO client of Neil Jesani Advisors, the in-house team of experienced Tax Attorneys and CPAs will be assisting you with this reporting and will begin gathering the required information in January, once the reporting platform comes online. If you are not yet a CFO client of Neil Jesani Advisors, it is not too late to get our assistance with this reporting – and developing great tax reduction strategies for you.

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