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Jul 31, 2024 Erin Crowley

CPAs: Update-How to Help Your Small Business Clients Navigate Beneficial Ownership Information (BOI) Reporting and the Corporate Transparency Act (CTA)

CPAs: Update-How to Help Your Small Business Clients Navigate Beneficial Ownership Information (BOI) Reporting and the Corporate Transparency Act (CTA)

The Corporate Transparency Act (CTA) Beneficial Ownership Information Reporting–implemented by FinCEN in January 2024–requires many businesses to report detailed ownership information to the government. 

While this regulation went into effect on January 1, 2024, there was discussion in March regarding the constitutionality of this act--as well as consideration for a formal delay in order to provide additional time for small businesses to learn about and better understand the requirements. 

Now, months later, no formal delay has been issued–or an update in the legal discourse–so we are here to remind you of your small business clients’ responsibilities ahead of the January 1, 2025 deadline.

At this stage, attorneys are recommending that reporting companies that qualify move forward with the reportingIf complicated questions come up with your clients, we recommend reaching out to your attorney for further information and guidance.

Summary: Beneficial Ownership Information (BOI) Reporting

Companies must report information about "beneficial owners" - individuals with significant control or owning at least 25% of the company.

    • For companies formed after January 1, 2024, information about the company applicant and the filing director is also needed.
Reporting Companies are required to report:
    • The legal name of the company and any trade name (DBA) used by the company
    • The company's street address
    • Tax Identification (EIN, SSN, TIN)
Beneficial Owners of Reporting Companies must report:
    • Full name
    • Date of birth
    • Residential Address
    • Government ID number (passport or driver's license)
    • Scanned government ID
Each Beneficial Owner must report the information listed above.

Who Needs to Report Beneficial Ownership Information?

Most U.S. and non-U.S. businesses formed by filing with a secretary of state or registered to do business in the U.S. are required to report, unless exempt.

See the table below for detailed exemptions–followed by a list of key exemptions to keep an eye on. 

Companies Who Are Required to Report BOI

Domestic Reporting Companies include:

  • LLCs
  • Corporations
  • Other entities created by filing with the state’s secretary or any similar office in the United States 

Foreign Reporting Companies are entities formed under the law of a foreign country that have registered to do business in the United States by filing with the Secretary of State or a similar office. Including:

  • LLCs
  • Corporations
Companies Who Are Exempt from Reporting BOI
  • Securities reporting issuer 

     

  • Governmental authority

     

  • Bank 

     

  • Credit union

     

  • Depository institution holding company 

     

  • Money services business

     

  • Broker or dealer in securities

     

  • Securities exchange or clearing agency 

     

  • Other Exchange Act registered entity 

     

  • Investment company or investment adviser 

     

  • Venture capital fund adviser 

     

  • Insurance company 

     

  • State-licensed insurance producer 

     

  • Commodity Exchange Act registered entity 

     

  • Accounting firm 

     

  • Public utility

     

  • Financial market utility 

     

  • Pooled investment vehicle

     

  • Tax-exempt entity 

     

  • Entity assisting a tax-exempt entity 

     

  • Large operating company 

     

  • Subsidiary of certain exempt entities

  • Inactive Entity

 

Key Exemptions to Consider

1. Your own firm

As a reminder, if your firm is registered with the Public Company Oversight Board under the Sarbanes-Oxley Act, your firm is exempt. If it is not registered with PCOAB, you must file BOI.

2. Larger operating companies are exempt from BOI reporting

The following is likely a rare scenario: but if you still service clients that started as a small business– that has since scaled significantly–they might be exempt from filing, if:

  • The business has more than 20 full-time employees
  • The business has a physical presence for operations in the United States
  • The business has reported more than $5,00,000 in revenue in the last year 

However, If the business drops below 20 employees, the business owner is required to file.

3. Subsidiaries of Exempt Entities

If a client is a subsidiary of a larger entity whose ownership interests are controlled by a larger company or wholly owned, directly or indirectly, they might be exempt.

4. Tax-exempt entities

Include:

  • 501(c) nonprofit organizations
  • 527(e)(1) political organizations
  • Charitable trusts described in IRC4947(A)(1) or (2)
5. Other Common Exemptions:

Include:

  • Banks
  • Credit Unions
  • Registered Broker/Dealers
  • Investment Companies
  • Insurance Companies
6. Companies that formally dissolved their entity with the Secretary of State before January 1, 2024

Clients with companies that ceased to exist as a legal entity before the the BOI reporting requirements became effective January 1, 2024 were never subject to BOI reporting requirements–unless the client has a secondary business that is still an active entity.

Filing Deadlines

Reports are submitted electronically through FinCEN’S BOI e-filing system
January 1, 2025:  Within 90 days: Looking ahead:
This deadline applies to companies that were created or registered before January 1, 2024.  Reporting companies created or registered in 2024–must file BOI within 90 calendar days of receiving actual or public notice of active registration. Starting on January 1, 2025–reporting companies must file within 30 calendar days of receiving actual or public notice of active registration. 

 

How to Help Your Small Business Clients Comply 

1. Direct clients to FinCEN's website to see if they need to report BOI.
2. If required, help them to identify beneficial owners and those with substantial control.
  • For details beyond basic information, direct them to an Employment Attorney like Nick Lipresti of Lipresti Law.
    • If your clients are looking for a trusted attorney, we can help. Our Connected Payroll network puts small business owners in touch with reputable experts right in their neighborhood.
  • Consider advising them to create a procedure for ongoing monitoring of ownership information, and what to do if a beneficial owner leaves their company.
3. As a trusted ally for your small business clients, you must also remind them the consequences of noncompliance.
  • Failure to comply can result in civil penalties of $500 per day, or even criminal penalties of up to $10,000 and imprisonment.

Learn More

FinCEN's website offers small business resources like videos, brochures, and FAQs to help your small business clients understand BOI reporting. Visit their website for more information.

 

 

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Published by Erin Crowley July 31, 2024