What is BOI? And Am I Required to File It?

Starting on January 1, 2024, the Corporate Transparency Act (CTA) takes its first significant step towards implementation. It introduces a federal filing requirement known as the Beneficial Ownership Information Report (BOI) for most corporations and limited liability companies (LLCs) formed in 2024 or later.

The primary goal of this act is to combat the misuse of anonymous shell companies for illicit purposes such as money laundering and tax evasion. It’s important to note that this requirement applies to all business owners, whether they are legitimate entrepreneurs or involved in criminal activities.

Key points to remember:

  1. Reporting deadlines:
  • Existing reporting companies as of December 31, 2023, have one year from the effective date to file their initial BOI reports.
  • Companies formed after the effective date or those that no longer qualify for exemptions must file within 30 days of formation or the date they lose their exempt status.
  • Updates or corrections to information must be filed within 30 days of any changes.
  1. Applicability:
  • The CTA primarily applies to entities like corporations, LLCs, and others formed by filing documents with state authorities. Sole proprietors are exempt.
  • Exemptions include large businesses with over 20 full-time employees and more than $5 million in prior-year receipts, heavily regulated entities (e.g., banks and insurance companies), nonprofits, and more. The exemption for large businesses may apply to updates but not the initial formation.
  1. Purpose:
  • The CTA’s objective is to compile a comprehensive government database containing the identities and contact details of the “beneficial owners” of various business entities. Beneficial owners are individuals who own or exercise significant control over the entity.
  1. Filing Requirements:
  • When forming a new LLC or corporation in 2024, you must file the beneficial owner information report with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) within 90 days of formation.
    • Required information for each beneficial owner includes:
      Full legal name
      Date of birth
      Complete current residential street address
      A unique identifying number from a current U.S. passport, state or local ID document, driver’s license, or foreign passport
      An image of the document that contains the unique identifying number.
  • Similar information is needed for the individuals who filed the entity’s formation documents.
  1. Filing Process:
  • The report is filed online in the BOSS (Beneficial Ownership Secure System) federal database, starting January 1, 2024. There are no filing fees, and the information is strictly for use by law enforcement, the IRS, and other government agencies. FinCEN does not disclose BOSS information to the public.
  1. Penalties:
  • Failure to file may result in civil penalties of up to $500 per day and fines up to $10,000, as well as potential imprisonment for up to two years for criminal violations.

FinCEN Beneficial Ownership Secure System (BOSS) data reporting is separate from state and local filings when forming a new business entity, the BOI report will become a routine part of the entire process moving forward.

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