The Corporate Transparency Act (CTA) has marked a pivotal shift in reporting obligations for small corporations and LLCs in the United States, commencing from January 1, 2024. This groundbreaking law aims to combat financial crimes by establishing an exhaustive government database containing information about beneficial owners. To guide you through these changes and ensure optimal visibility, here are 13 answers to crucial questions on the new BOI reporting to FinCEN.
1. Who Needs to File?
Every active LLC owner, regardless of the number of properties it holds, is required to file a Beneficial Ownership Information (BOI) report through the Beneficial Ownership Secure System (BOSS). The only exception is "large operating companies" with more than 20 employees and over $5 million in U.S.-sourced income.
2. Multiple Properties, Multiple Reports?
Yes, if you own multiple LLCs, each with its own rental property, you must file separate BOI reports for each, provided they don't fall under the category of "large operating companies."
3. Can My CPA File the BOI Report?
While CPAs can help with IRS compliance, the CTA falls outside the tax law. Filing a BOI report may be considered the unauthorized practice of law, so it's crucial for CPAs and non-lawyer tax practitioners to consult their malpractice insurer before offering this service.
4. What are the Penalties?
Willful violations can lead to civil penalties of up to $500 per day, criminal fines of up to $10,000, and/or imprisonment for up to two years. Both individuals and corporate entities can be held liable.
5. Do Self-Employed Individuals or Partnerships Need to File?
Self-employed individuals without an LLC or corporation are exempt. Most general partnerships are also exempt, but limited partnerships formed by filing with a secretary of state must file a BOI report.
6. What if My Business Doesn't Have a Physical Address?
The BOI report requires the current street address of the principal place of business, excluding P.O. boxes, attorney addresses, or in-care-of addresses.
7. Are CPA Firms Subject to Sarbanes-Oxley Exempt?
Public accounting firms registered with the Public Company Accounting Oversight Board (PCAOB) or qualifying as "large reporting companies" may be exempt from BOI filing.
8. Is the Registered Agent Responsible for Filing?
No, the registered agent is not obligated to file the BOI report, although some may offer it as part of their service.
9. Can I Use an ITIN Instead of a Social Security Number?
You don't need to provide a Social Security number or ITIN. Beneficial owners can use unique identifying numbers from various documents such as a U.S. passport, state driver's license, or foreign passport.
10. Must I Name My Attorney in the BOI Report?
For companies created in 2024 or later, the "company applicant" must be identified, which could include the attorney who filed the articles of incorporation.
11. What if Someone Listed Leaves the Company?
An updated BOI report must be filed within 30 days of any change in beneficial ownership.
12. Does Giving My Child Shares Trigger a BOI Report?
Not if your child is a minor without voting rights. However, an updated report is required when they become an adult.
13. Why Would a Criminal File a BOI Report?
Criminals may file to avoid civil and criminal penalties. However, FinCEN can cross-reference filings with the BOSS database, making it challenging for non-compliant entities to escape scrutiny.
Key Takeaways:
- BOI reporting is mandatory for defined small corporations and LLCs.
- Compliance applies to businesses formed before and after January 1, 2024.
- Professional assistant's role is under scrutiny, and penalties for non-compliance are significant.
- Exclusions exist for self-employed individuals and most partnerships.
- Regular updates are crucial, reflecting changes in beneficial ownership.
- The U.S. joins other nations in adopting centralized BOI filing to combat global financial crimes.
Understanding and adhering to the CTA's BOI reporting requirements is essential for businesses to navigate this new regulatory landscape successfully. Stay informed, consult with legal professionals, and ensure your filings are accurate and up-to-date to avoid potential penalties.
Disclaimer: Laws and regulations are subject to change, and readers are advised to consult EPL advisors for personalized advice and compliance with specific state requirements. This information is not specific advice and is meant for general education.
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