Effective January 1, 2024, the Corporate Transparency Act (CTA) mandated the reporting of beneficiary ownership information (BOI). All LLC owners and managers should be aware of this new reporting obligation. They should first ascertain if their business is required to submit BOI reports, and if so, they should start getting ready to comply.
What is the meaning of beneficial ownership?
The CTA requires the reporting of beneficial ownership information. Beneficial ownership information refers to identifying information about the individuals who directly or indirectly own or control a company.
What is the beneficial ownership rule for an LLC?
The CTA requires a beneficial ownership information (BOI) report to be filed by every entity that meets the definition of a “reporting company”. An LLC is defined by the CTA as a reporting company. Therefore, every LLC created in the USA will have to file a BOI report unless it qualifies for an exemption.
Can an LLC be exempt from filing a BOI report?
Yes. There are 23 exemptions. If an LLC qualifies for one of these, the LLC is exempt. However, LLCs will not qualify for most of these exemptions because they mainly include entities that are already subject to government regulation and file reports with government agencies such as public corporations, financial institutions, insurance companies, and tax exempt entities.
Is there an exemption based on the size of the LLC?
Yes. Companies are exempt from the definition of a reporting company if they employ more than 20 full time employees in the US, have an operating presence at a physical office in the US, and filed a federal income tax or information return for the previous year showing more than $5 million in gross receipts or sales.
If my LLC has to file a BOI report, what information will have to be provided in the report?
The report has to include the company’s legal name and any trade or DBA names, its principal place of business address, the jurisdiction where it was formed, and its taxpayer identification number.
For each of your company’s beneficial owners (and company applicants for LLCs created on or after January 1, 2024) the report has to provide the individual’s legal name, birthdate, home address (except for certain company applicants, who have to provide a business address), and an identifying number from a driver’s license, passport, or state ID, as well as an image of the document from which that number was obtained.
Does an LLC have a beneficial owner?
Yes. A beneficial owner is defined as any individual who, directly or indirectly, either exercises substantial control over a reporting company or owns or controls at least 25 percent of the reporting company’s ownership interests. Every LLC will have at least one beneficial owner. For example, even if there was no individual who owned 25% of the LLC, there will still be one or more individuals who are able to make important decisions on behalf of the LLC, or who otherwise exercise substantial control over the LLC.
Who is not a beneficial owner?
A beneficial owner has to be an individual. In addition, “beneficial owner” does not include a minor child (although the information of their parent or guardian has to be reported); an individual acting as a nominee, intermediary, custodian, or agent of another individual; an employee acting solely as an employee; an individual whose only interest in the company is a future interest through a right of inheritance; and a creditor.
Does an LLC have a company applicant?
Yes. There can be up to two individuals who qualify as company applicants — (1) the individual who directly files the document that creates the LLC and (2) the individual that is primarily responsible for directing or controlling the filing of the document. Even though LLCs created before 2024 have a company applicant, they do not have to report any information about their company applicant. Only LLCs created in 2024 and beyond are required to do so.
When can my LLC file its initial BOI report?
LLCs created before January 1, 2024 can file their initial report beginning on January 1, 2024. The report must be filed by January 1, 2025. LLCs created on or after January 1, 2024 and before January 1, 2025, have to file their initial report within 90 calendar days of receiving actual or public notice of their creation. LLCs created on or after January 1, 2025 have to file their initial report within 30 calendar days of receiving actual or public notice of their creation.
How and where does my LLC file its initial BOI report?
The report is filed electronically with the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Department of Treasury, via a filing system available on FinCEN’s website. There is no fee for filing the report. The filing process can be managed and submitted by a third-party professional services provider to simplify the process for your business.
What happens if my LLC’s beneficial owners change or the information reported changes?
If there is a change in who the beneficial owners are, or a change in the information previously reported about the company or the beneficial owners, an updated report must be filed with FinCEN within 30 calendar days of the change. Information about company applicants (required of reporting companies created or registered in 2024 and beyond) does not have to be updated.
What if, after my LLC filed its BOI report, it qualifies for one of the exemptions?
An updated BOI report can be filed with FinCEN indicating that the company is now exempt.
What if my LLC files a BOI report and then realizes there was a mistake in the reported information?
A corrected report must be filed within 30 days from the date you became aware of or had reason to know of the inaccuracy.
What if, for security reasons, I’m concerned about my company having to maintain all that personal information? Can individuals provide their personal information directly to FinCEN instead of to my LLC?
Yes. An option, if you are concerned about collecting and maintaining personal information, is to have your beneficial owners (and company applicants where applicable) apply to FinCEN for a FinCEN Identifier. FinCEN will issue them a number, which they can give to you, and your LLC can report that number instead of each piece of personal information.
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How can beneficial owners and company applicants obtain a FinCEN Identifier?
Applications for a FinCEN Identifier can be submitted to FinCEN, by electronic submission via the filing system on FinCEN’s website. The individual who obtains a FinCEN Identifier must provide all of the required information to FinCEN in their application for a FinCEN Identifier and will be required to file an updated application with FinCEN within 30 days of any change in their reported information.
Will the public have access to the reported beneficial ownership information?
No. FinCEN is authorized to disclose beneficial ownership information only to certain groups and only for certain authorized purposes. Those groups include federal law enforcement and national security agencies, state law enforcement agencies with court authorization, the Treasury Department, financial institutions with the company’s consent, and federal and state regulators of financial institutions.
What are the penalties for non-compliance?
Violators are subject to a civil penalty of up to $591 for each day the violation continues, and criminal fines of up to $10,000, imprisonment for up to two years, or both.
