Understanding Beneficial Ownership Information Reporting for Local Businesses
Local small businesses need to be aware of a new requirement for businesses: Beneficial Ownership Information (BOI) reporting. This article will clarify what BOI reporting means, who needs to file, and some important exceptions to keep in mind.
What is BOI Reporting?
BOI reporting requires corporations and LLCs to disclose the individuals who truly own and control the business. This initiative aims to enhance transparency and prevent illegal activities, such as money laundering and tax evasion. The Federal government started working on a system for disclosing the beneficial owners of all corporations and LLCs back in 2020 after the Corporate Transparency Act was passed into law. The rules and requirements were then written by the Financial Crimes Enforcement Network (FinCEN), and they went into effect in 2024.
Who Needs to File?
- Corporations: If your business is a corporation, you are required to file a BOI report. Even non-profit corporations may be required to file (see exceptions below).
- LLCs: If your business is an LLC, you also need to file. Even LLCs that hold rental properties are required to file. A partnership that is registered as an LLC will also need to file.
- Sole Proprietorship: If your business is a sole proprietorship—that is, not a corporation or an LLC, you do not have to file.
If you’re unsure about your business structure, you can check your registration status with the Alabama Secretary of State. Visit this link to search for your legal business name. LLCs and Corporations must include this in their legal name such as ABC, LLC XYZ Corp or
Key Exceptions to the Filing Requirement
While many businesses must file a BOI report, there are some exceptions you should be aware of:
- Tax-Exempt Organizations: If your organization is tax-exempt (such as a 501(c)(3)), you do not need to file as long as you remain current with your annual tax filings, like Form 990. This applies to many non-profit organizations, which may otherwise be classified as corporations.
- Inactive Entities: If you have an LLC that has been inactive, you may not need to file, provided it meets specific criteria:
- The LLC was formed before 2020.
- It has not engaged in any business activities in the last 12 months.
- There have been no foreign owners or changes in ownership during this period.
- It has not received or sent over $1,000 in the last 12 months.
- It possesses no assets, such as bank accounts or real estate.
- Certain Large Entities: Companies with revenues over $5 million or 20 employees may also qualify for exemptions.
- Plaintiffs in the lawsuit about BOI reporting: Certain plaintiffs who filed a lawsuit have been exempted from some of the requirements. The lawsuit did not exempt all the rest of us.
Filing the Report
If you determine that your corporation or LLC is required to file a BOI report, you can file online at this website https://boiefiling.fincen.gov/. You will need to gather these specific documents and information:
- Identification: A copy of your driver’s license is necessary.
- Ownership Information: You need to report the names and details of all owners who hold 25% or more of the business.
- Management: You must include all LLC managers or Corporate Officers if you have anyone like that running the business who does not own 24% or less of the business.
Due Dates
- If your LLC or Corporation was registered before January 1, 2024, you are required to file by December 31, 2024.
- If your LLC or Corporation was formed during 2024, you are required to file within 90 days of formation.
- If your LLC or Corporation was formed in 2025 or later, you will be required to file within 30 days of formation.
- If there are any changes in ownership or management, you are required to submit a new report within 30 days of the change. This ensures that the information remains current and accurate.
Penalties
The penalty for failing to file the Beneficial Ownership Information (BOI) report with FinCEN is up to $10,000 and possible prison time. FinCEN will typically waive penalties if errors and omissions are corrected within 90 days.
Conclusion
Understanding your obligations regarding BOI reporting is essential for corporations and LLCs in our community. Staying compliant will help you avoid potential legal issues and contribute to the integrity of the business environment. If you have more questions you can read the official guide at https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf for more information. If you want to start a relationship with accounting professionals who can help you keep up with new laws and requirements, please contact us here. Be proactive to ensure your business remains in good standing and continues to thrive.