Understanding the Beneficial Ownership Information Report: A Guide for Small Businesses
December 26, 2024 Update on Beneficial Ownership Information (BOI) Reporting Requirements: Deadlines Extended Following Legal Developments
Recent legal proceedings have impacted the enforcement of the Corporate Transparency Act (CTA) and its Beneficial Ownership Information (BOI) reporting requirements. A federal appeals court has lifted the previous nationwide injunction, reinstating the reporting obligations. In response, the Financial Crimes Enforcement Network (FinCEN) has extended the filing deadlines to provide businesses additional time to comply.
Key Updates:
Injunction Lifted: The Fifth Circuit Court of Appeals has lifted the nationwide injunction that had temporarily halted the enforcement of the CTA's BOI reporting requirements. This reinstates the obligation for reporting companies to file BOI reports with FinCEN.
Extended Deadlines: To accommodate businesses affected by the injunction and its subsequent lifting, FinCEN has extended the BOI reporting deadlines:
Existing Reporting Companies: Entities created or registered before January 1, 2024, now have until January 13, 2025, to file their initial BOI reports.
New Reporting Companies:
Formed Between September 4, 2024, and December 23, 2024: Companies with original filing deadlines between December 3, 2024, and December 23, 2024, now have until January 13, 2025, to submit their BOI reports.
Formed Between December 3, 2024, and December 23, 2024: These entities have an additional 21 days from their original filing deadlines to comply.
Formed On or After January 1, 2025: Entities created or registered on or after this date must file their initial BOI reports within 30 days of receiving actual or public notice that their creation or registration is effective.
December 3, 2024 Update on Beneficial Ownership Information (BOI) Reporting Requirements: Nationwide Injunction in Effect
Recent legal developments have paused the enforcement of the Beneficial Ownership Information (BOI) reporting requirements under the Corporate Transparency Act (CTA). On December 3, 2024, a federal judge in Texas issued a nationwide preliminary injunction, temporarily halting the enforcement of these rules. Here’s what you need to know about the current situation:
What This Means for Businesses
Reporting Paused: The injunction prevents the enforcement of BOI reporting rules for all businesses in the U.S., not just those directly involved in the lawsuit. This applies to both existing and newly formed reporting companies.
No Immediate Filing Required: Businesses are not obligated to file the BOI report with the Financial Crimes Enforcement Network (FinCEN) until further notice. Previously, businesses formed before January 1, 2024, were required to file by January 1, 2025, and those formed after this date had to file within 30 days of formation.
Future Compliance Still Possible: The injunction is preliminary, meaning it is not a final decision. If the case is overturned or the injunction lifted, reporting requirements could resume.
Next Steps for Businesses
Stay Informed: Keep track of updates from FinCEN, the Department of the Treasury, and legal experts. The government may appeal the decision, and reporting requirements could be reinstated.
Be Prepared: Consider gathering necessary ownership and company information to ensure readiness if the reporting rules are revived.
Why the Injunction Was Issued
The court found that the CTA’s reporting rules might be unconstitutional, citing privacy and other legal concerns. This ruling underscores ongoing debates about balancing transparency with business privacy and regulatory burdens.
For businesses, this pause offers temporary relief but also uncertainty. It is crucial to remain prepared for potential changes while enjoying the current reprieve from compliance obligations. Stay tuned for updates as the legal process unfolds.
As a business owner, staying compliant with IRS and federal regulations is crucial. A recent addition to those requirements is the Beneficial Ownership Information (BOI) Report, a filing requirement introduced by the Financial Crimes Enforcement Network (FinCEN). I’ll break down what the BOI report is, who needs to file it, when it’s due, and how to file it.
What Is the BOI Report?
The BOI Report is a new federal filing requirement established under the Corporate Transparency Act (CTA). Its purpose is to improve transparency in business ownership, making it harder for individuals to hide their identities behind legal entities for illegal activities, such as money laundering and tax evasion.
In summary, the report requires certain entities to disclose information about their beneficial owners—individuals who own or control a company—providing greater clarity around who stands to benefit from the company’s operations.
Who Needs to File the BOI Report?
The BOI Report applies to most small and medium-sized legal entities, including:
Corporations
Limited Liability Companies (LLCs)
Other similar entities created by filing formation documents with a state or tribal authority.
There are exemptions, however, such as:
Publicly traded companies
Larger companies with more than 20 full-time employees and over $5 million in revenue that operate in the U.S.
Nonprofit organizations and government entities
The report must include information on the company and its beneficial owners, such as name, date of birth, address, and a unique identifying number from an accepted document (e.g., passport or driver’s license)
When Is the BOI Report Due?
The timing of the report depends on your company’s formation date:
Existing entities (formed before January 1, 2024) must file their BOI Report by January 1, 2025.
New entities (formed on or after January 1, 2024) must file their BOI Report within 30 days of formation or registration.
Failure to file on time can result in significant penalties, including fines and potential criminal charges.
How to File the BOI Report
Filing the BOI Report is done electronically through FinCEN's online system. Here's how:
Register for a FinCEN account
Visit FinCEN.gov to set up an account if you don’t already have one.
Gather required information
The Reporting Company:
Full legal name of the entity
Any trade names, doing business as (DBA) names, or similar names
Current address of the principal place of business or primary business location
State, tribal, or foreign jurisdiction of formation or registration
Employer Identification Number (EIN) or other taxpayer identification number
Each Beneficial Owner (and Company Applicants for newly formed entities):
Full legal name
Date of birth
Current residential address or business address used for tax filings
Unique identifying number and issuing jurisdiction from one of the following:
U.S. Passport
State-issued driver’s license or identification card
Foreign passport (for non-U.S. persons)
Other government-issued document
A scanned image of the identification document
For new entities formed on or after January 1, 2024, you must also provide information about the company applicant(s)—the person(s) who filed the formation documents or registered the entity in the U.S.
Submit the report
Follow the prompts in the system to enter and submit your BOI Report.
FinCEN has indicated that filing assistance and resources will be available to ensure accuracy, so make use of any guides or tutorials provided on their site.
Why It Matters
Understanding and complying with the BOI Report requirements is critical for avoiding penalties and ensuring your business remains in good standing. Beyond compliance, this initiative contributes to broader efforts to enhance transparency and accountability in the business world.
Staying compliant with evolving regulations like the BOI Report is essential for maintaining your business's good standing. While we don’t offer services specifically for filing the BOI Report, we’re here to help you ensure your financial records and reports are accurate and up-to-date, making compliance with federal requirements more manageable.
If you’re working on streamlining your bookkeeping, cleaning up your accounts, or preparing for year-end financial obligations, reach out to us today to see how we can help your business succeed.
John is the owner and primary accountant of Zero Grid Accounting, provides honest accounting solutions to small businesses looking to thrive.
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