🚨 BOI News Update: The Beneficial Ownership Form 🚨
Major BOI News regarding the Beneficial Ownership Information (BOI) form that many business owners were supposed to file with FinCEN by the end of the year.
Here’s what’s happening:
A Texas court has blocked the BOI rule this week, declaring it unconstitutional. This means the rule cannot currently take effect. If you’ve been concerned about privacy or compliance, this pause may come as a relief.
But is the rule completely dead?
Not yet. The Department of Justice will appeal the decision, and this case could go all the way to the Supreme Court. That said, with a new administration taking office soon, my gut feeling is this will likely fall down the priority list and could ultimately fade away.
For now, if you haven’t filed the form, you can hold off without worry—but don’t ignore it entirely. Things could still change quickly depending on legal and political developments.
What should you do next?
- Stay informed: I’ll keep you updated on the latest developments via email and my monthly Power in Numbers Live YouTube show.
- Check privacy concerns: If privacy is a concern, this could be the reprieve you were hoping for.
- Wait and watch: There’s no need to take action unless a court or legislative change reintroduces the requirement.
P.S. If you missed the last Power in Numbers Live show, where I discussed this very possibility and the overturning of the Chevron Doctrine that will likely lead to less regulation overall, you can watch it here.
The Corporate Transparency Act 2024: How it Started and What It Was Trying To Do
With 2024 well underway, small business owners and entrepreneurs have some important new compliance requirements to tackle. One of the biggest changes this year is the Corporate Transparency Act (CTA) (currently not in effect due to the Texas lawsuit mentioned above).
The CTA sought to introducee new reporting requirements for many small businesses, especially LLCs and S Corporations. It’s passage would also require other reporting companies mandated to submit beneficial ownership information (BOI) reports.
If you own or run a small business, this blog explains the key details you need to know about this act, the deadlines for filing (if it wins it court), and the penalties for non-compliance (if it’s not repealed). Let’s dive into what this new law means and how you can easily meet its requirements.
What Is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) is a new federal law requiring small businesses to submit Beneficial Ownership Information (BOI) to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).
The purpose of this law is to combat money laundering, prevent terrorist financing, and other illicit activities carried out through shell companies. While businesses already provide some of this information in state filings, the federal government wants a consolidated, national database of ownership to help law enforcement identify and track illegal financial activities.
(The state of Texas calls this unconstitutional and has filed suit – so the law is currently on hold as of December 2024.)
However, even if the law makes it back out of court, if your business is small and legitimate—don’t worry. This process won’t be complicated, and we’ll walk through exactly what to do.
Who Needs to File a Beneficial Ownership Information Report (If the law passes)?
The Corporate Transparency Act targets smaller businesses that aren’t already under significant regulatory scrutiny. Here’s a breakdown of who must comply and who is exempt:
- Required to File:
- LLCs and S-Corps
- Businesses with less than $5 million in revenue and under 20 employees
- Exempt from Filing:
- Sole proprietors (if no legal entity, like an LLC, is registered)
- Nonprofits
- Large corporations and publicly traded companies
- Banks and other financial institutions already regulated by federal authorities
If the law becomes active again, new companies created after January 1, 2024,must submit details about their company applicants. This in addition to a list of their beneficial owners as part of compliance requirements.
Note: If you’re running an LLC or S-Corp, it’s highly likely this law applies to you! So keep reading to learn how to file your BOI report on time!
Exemptions according to the initial law (now paused due to litigation)
When active, The Corporate Transparency Act (CTA) provides exemptions for certain types of entities from the beneficial ownership information reporting requirements.
These exemptions are designed to exclude entities that are already subject to robust transparency and reporting requirements, or those that are not likely to be used for illicit activities.
Exempt Entities
The following types of entities are exempt from the CTA’s reporting requirements:
- Public Companies: Companies that are publicly traded on a national securities exchange, such as the New York Stock Exchange (NYSE) or NASDAQ, are exempt from reporting.
- Large Operating Companies: Companies with more than 20 employees and $5 million in annual gross receipts or sales are exempt from reporting.
- Investment Companies and Advisers: Investment companies and investment advisers registered with the Securities and Exchange Commission (SEC) are exempt from reporting.
- Subsidiaries of Exempt Entities: Subsidiaries of entities that are exempt from reporting, such as public companies or large operating companies, are also exempt from reporting.
- Non-Profit Organizations: Non-profit organizations that are exempt from taxation under section 501(c) of the Internal Revenue Code are exempt from reporting.
- Government Entities: Government entities, including federal, state, and local government agencies, are exempt from reporting.
Other Exemptions
In addition to the exemptions listed above, the CTA also provides exemptions for certain types of entities that are not likely to be used for illicit activities, such as:
- Dormant Companies: Companies that have been dormant for a period of at least 12 months and have not engaged in any business activity during that time are exempt from reporting.
- Companies in Bankruptcy: Companies that are in bankruptcy proceedings are exempt from reporting.
Reporting Requirements for Exempt Entities (if law isn’t overturned)
Exempt entities do not submit a beneficial ownership information report.(Even if the law is reinstated.) They should plan to maintain records of their beneficial ownership information. These entities must make records available to the Financial Crimes Enforcement Network (FinCEN) upon request.
Important Takeaways
Right now, the CTA and BOI report is not required due to the December 2024 lawsuit filed by the State of Texas. Should it get reinstated, the Corporate Transparency Act provides exemptions for certain types of entities from the beneficial ownership information reporting requirements.
These exemptions exclude entities currently subject to robust transparency and reporting requirements. Or those not likely used for illicit activities.
However, even exempt entities may face requirements to maintain records of their beneficial ownership information. And make them available to FinCEN upon request.
What Information Do You Need to Provide?
While not necessary at this time (December 2024), filing your Beneficial Ownership Information (BOI) report will only take a few minutes. Businesses need to report information about their beneficial owners to comply with the Corporate Transparency Act.
If the law becomes active again, here’s what you’ll need to submit:
- Owner Names
- Identifying information (like a passport or driver’s license)
- Addresses of owners
- Business control information (who has substantial control in the company)
Who is considered a beneficial owner?
- Any person who owns 25% or more of the company
- Anyone with substantial control over the company, such as key decision-makers (even if they own 0%)
If ownership is complex—such as ownership through a trust or IRA—you may need to consult additional resources. You can do so on FinCEN’s website to ensure compliance.
Deadlines for Filing (If the law becomes active again)
The deadlines for submitting your BOI report vary depending on when you registered your business:
- Existing businesses (registered before January 1, 2024): You have until December 31, 2024 to submit your BOI report.
- New reporting companies created (registered on or after January 1, 2024): You must file the report within 90 days of registration.
- New businesses starting in 2025 or later: The deadline for filing is 30 days from registration.
Penalties for Non-Compliance
Make sure to watch the news and stay up to date by watching our YouTube Channel..
Should the CTA make it out of court and back into law, failing to file your BOI report—or submitting incorrect information—can lead to serious penalties:
- Civil penalties: Up to $500 per day until business submits the report.
- Criminal penalties: Fines of up to $10,000 and up to two years in jail for willfully providing false information or failing to comply
The Corporate Transparency Act aims to prevent tax fraud by ensuring accurate reporting of beneficial ownership information.
It’s unlikely that most small businesses will find themselves aggressively pursued. However, should the law become active again, it’s better to be safe and file your report early.
That way, you can avoid any fines or headaches later.
How to Stay Compliant If the Law Becomes Law
As the courts are battling it out, you know longer have to worry about the December 31, 2024 BOI deadline. That was the date to make on your calendar to ensure you submitted your BOI report before the deadline.
If you’re starting a new business, you may want to include the BOI report in your list of essential tasks to complete during setup. Similarly to filing for your LLC. The law could become active in the future.
If it does, remember to update any changes to your business ownership or addresses. Submit updates to FinCEN within 30 days. This will help you to stay compliant.
Summary: Stay tuned for Updated BOI News
The Corporate Transparency Act: a shortlived, new requirement designed to prevent crime. For most small business owners, it’s simply a quick compliance task (if it becomes a law again).
And for the State of Texas, it was unconsistutional. Which has put the law on hold and for the court system to determine its legality.
If the CTA becomes law, you’ll want to file your BOI report on time. Report any changes promptly. Again, if CTA becomes a law again,this will help you avoid penalties and stay in good standing with federal regulators.
It is crucial to report accurate information about beneficial owners. This will help you avoid legal implications and potential penalties for non-compliance with the CTA.
Ddon’t forget to check out the official resources on FinCEN’s website for FAQs and filing instructions.
Resources for Small Business Owners
Inventory Management Worksheet: Inventory Worksheet
BOI (Beneficial Ownership Information) form: https://www.fincen.gov/boi
More BOI reference materials: https://www.fincen.gov/boi/Reference-materials
Annual Planning Guide: Annual Planning Guide
Profit & Loss Template and Dashboard: P&L Dashboard
