IMPORTANT UPDATE – February, 2025 On February 18, 2025, following a decision by the U.S. District Court for the Eastern District of Texas in Smith v. U.S. Department of Treasury, et al., 6:24-cv-00336 (E.D. Tex.), beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (“CTA”) are once again back in effect with a new deadline of March 21, 2025.
This Client E-Alert is provided to remind you of a significant change in federal law effective January 1, 2024 that impacts most privately held corporations, partnerships, limited liability companies – including single member LLCs, and other entities. It is important that you take steps now to determine if the Corporate Transparency Act deadlines apply to your business. The Corporate Transparency Act (“CTA”), which took effect on January 1, 2024, seeks to assist law enforcement in combatting money laundering, tax fraud, financing of terrorism, and other illicit activity through anonymous shell and front companies. To accomplish this task, the CTA requires a wide variety of business organizations (referred to as “Reporting Companies”) to file an initial report with the Financial Crimes Enforcement Network (FinCEN) disclosing, among other things, information regarding the entity and its beneficial owners, and imposes a continuing obligation to report any changes to previously reported information.
What is the Deadline for BOI Reporting?
There are different filing timeframes depending on when an entity is registered/formed or if there is a change to the beneficial owner’s information.
- Existing entities (created/registered before 1/1/24) — must file by 1/1/25
- New entities (created/registered in 2024) — must file within 90 days
- New entities (created/registered after 12/31/2024) — must file within 30 days
- Reporting companies that have changes to previously reported information – including minor changes such as a new address — must file within 30 days
Penalties for willfully not complying with the BOI reporting requirement can be significant.
Am I Exempt?
The complete list of entities that are exempt from the reporting rules is too lengthy to include here — ranging from government units to not-for-profit organizations to insurance companies and more. Notably, an exemption was created for a “large operating company” that employs more than 20 employees on a full-time basis, has more than $5 million in gross receipts or sales (not including receipts and sales from foreign sources), and physically operates in the United States. However, many of these companies already must meet other reporting requirements providing comparable information.
In all, there are 23 exemptions, so please contact your Warady & Davis LLP advisor at 847-267-9600 or [email protected] or your legal counsel to understand if you qualify as exempt.
How Does My Business File a BOI Report?
As of Jan. 1, 2024, the electronic filing system is available and the form to report BOI can be accessed. Reporting Companies can make these filings directly by going online and registering at https://www.fincen.gov/boi.
What Information Is Required on a BOI Report?
There are two types of reporting companies; a Domestic reporting company (DRC) and a Foreign reporting company (FRC). Both involve corporations and limited liability companies. Both must file a document with a secretary of state or similar office. The difference is a DRC is created through the filing of its documents, while an FRC is formed under the law of a foreign company and has to file documents to register to conduct business in the U.S.
A reporting company must report:
- Legal name
- Any trade names, DBAs, or trading as names
- Current street address of its principal place of business
- Its jurisdiction of formation or registration
- Taxpayer ID#
Beneficial owners must report:
- Individual’s name
- Date of birth
- Residential address
- An ID# from an acceptable ID document – passport, U.S. driver’s license, and name of issuing state or jurisdiction of the ID document
- Must supply an image of the ID document and it cannot be expired
Who Qualifies as a Beneficial Owner?
There are a few factors used in determining a beneficial owner, including an individual who, indirectly or directly:
- Exercises substantial control over a reporting company
- Owns or controls 25% or more of a reporting company’s ownership interests
Looking Ahead
This BOI reporting requirement is expected to impact tens of millions of businesses in America and certainly a portion of our W&D clients. We recommend taking steps now to determine whether you qualify for an exemption and, depending on the outcome, collect your information to be prepared to file by your required deadline (see above).
For more information regarding the CTA reporting requirements and how to file visit https://boiefiling.fincen.gov/. You may also visit www.aicpa-cima.com/boi.
Questions?
Please contact your Warady & Davis LLP advisor(s) with your questions or if you need assistance with your BOI reporting at 847-267-9600; [email protected].
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