Well here we are again hitting an unwelcome but necessary topic.
This is the longer read on the subject of the new FinCEN Beneficial Owner Information Reporting requirements that became effective this year and which instituted under a previous presidential administration that impact most small business LLC’s, corporations and partnerships.
The deadline for companies to file the BOIR is January 1, 2025 - this means now!
Millions of businesses have yet to file… which could mean a sluggish filing system the closer it gets to the end of December.
All I can say is to understand where you fit into this framework and respond accordingly..
Refer to links below for more information.
Memo to clients and interested others:
We are sending you this memo to provide you with general information regarding the new FinCEN reporting rules as well as initial steps your company should take to address the implications of the Corporate Transparency Act (CTA) to your business organization(s). Although several states have filed lawsuits to repeal the CTA as unconstitutional cases are being appealed to the United States Supreme Court, the requirements under CTA currently apply.
In a nutshell, registered business entities such as LLCs, partnerships, C-corporations and S-corporations, see below “What is a Reporting Company,” are now required to file with FinCEN to report basic information on the company, its beneficial owners and those who have “substantial control,” and are required to update that information as it changes.
Penalties for willfully violating the CTA’s reporting requirements are severe. The assessment and application of the requirements may require legal guidance. We are not able to provide you any legal advice and we do not provide services to file beneficial owner information reports.
What do you need to do? If your business entity is considered a “Reporting Company” (see below) the company must file online with FinCEN https://www.fincen.gov/boi
These are the deadlines if your business is considered a “Reporting Company”:
· If your business entity existed before Jan. 1, 2024, you have until Jan. 1, 2025. (ie., NOW)
· New business entities created in 2024 have 90 days from the date of formation.
· New business entities created in 2025 and forward have 30 days from the date of formation.
· If there are changes in the required information of the business, or of the beneficial owners and those who have substantial control, update it within 30 days of the change.
What is a “Reporting Company”? According to the CTA, a reporting company is defined as a corporation, limited liability company (LLC), or other type of company created by a filing with a Secretary of State or equivalent official. This applies to entities actively engaged in business as well as “parked” entities not actively being used for business.
Sole proprietorships are generally exempt from filing. Simply getting an IRS EIN#, or registering a fictitious or assumed business name are generally not considered creating a reporting company and are exempted from filing. Reference FinCEN FAQ #6 at https://www.fincen.gov/boi-faqs#C_6
There are several exceptions to who is required to file under the CTA, however the exceptions generally do not apply to most small business entities. Notable exceptions are tax-exempt nonprofits and “large operating companies” refer to FAQ#C.2 and L.11 at https://www.fincen.gov/boi-faqs
Who is a “Beneficial Owner”? According to the CTA, a beneficial owner is any individual who, directly or indirectly, exercises “substantial control” OR owns or controls at least 25% of the company’s ownership interests. An individual exercises “substantial control” if the individual (i) serves as a senior officer of the company; (ii) has authority over the appointment or removal of any senior officer or a majority of the board; or (iii) directs, determines, or has substantial influence over important decisions made by the reporting company. Thus, senior officers and other individuals with control over the company are beneficial owners under the CTA, even if they have no equity interest in the company.
In addition, individuals may exercise control directly or indirectly, through board representation, ownership rights associated with financing arrangements, or control over intermediary entities that separately or collectively exercise substantial control.
Some items to consider include, but are not limited to, the following:
· Did you start or dissolve a business entity in 2024?
· Do you own 25% or more of an interest in an LLC, partnership, or corporation?
· Has equity ownership changed? Ie., new owner, departing owner, change in equity interest.
· Do you have any undissolved business entities you are not actively using for business? Refer to FinCEN FAQ#C13 and #C14 https://www.fincen.gov/boi-faqs#C_13
· Do any individuals associated with your business entity have “substantial control”?
· Do you have substantial control in a business entity but not an ownership interest?
· Consider processes and procedures to monitor future changes in beneficial owners
· If you have already filed, have there been changes in any reportable information of the company or changes to a beneficial owner’s information? See below.
· If your business is a non-profit, confirm your IRS tax exemption, see IRS Publication 78 or search for your organization’s status here https://www.irs.gov/charities-non-profits/tax-exempt-organization-search. If tax-exempt status has been revoked (could be simply for not having filed the required 990s for three years in a row) the nonprofit reverts to a regular corporation for tax purposes and is subject to CTA filing requirements.
What information is required? For specifics, please refer to Beneficial Ownership Information | FinCEN.gov at https://www.fincen.gov/boi-faqs
· Company: name, trade name(s), business street address, jurisdiction of formation, and EIN#
· Beneficial owners: Name, birth date, residential address, identifying number from a driver’s license or passport and an image of the identifying document.
We may be able to assist with general questions. As always, please contact us, or your legal counsel, as soon as possible if you have concerns. Please see the links below for more information.
Sincerely,
Jay Lode, CPA, Lodestar Consulting, LLC
For more information:
· FinCEN Beneficial Ownership Information Reporting | FinCEN.gov
https://www.fincen.gov/boi
· Small Business Resources: Small Business Resources | FinCEN.gov
https://www.fincen.gov/boi/small-business-resources
· FAQ’s Beneficial Ownership Information | FinCEN.gov https://www.fincen.gov/boi-faqs.
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