Nelly Acarp
Sole proprietorships and partnerships do not have to report business ownership. … [+]
Beneficial Ownership Information (BOI) reporting rules, with their stiff monetary (and even criminal) penalties for non-compliance, have caused fear and confusion among small business owners across the country. To add to the confusion, some U.S. lawmakers are now calling for the repeal of the Corporate Transparency Act (CTA), the law that mandates BOI reporting.
So what can we expect, and what should business owners who have not yet filed their BOI reports with the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) do?
Some things to consider are:
Who is required to submit BOI reports under the Corporate Transparency Act?
The beneficial ownership information reporting requirement went into effect on January 1, 2024. This requirement requires domestic and foreign entities that meet FinCEN's definition of a “reporting company” to file reports disclosing information about beneficial owners and corporate filers.
Tens of millions of small businesses (those with 20 or fewer full-time employees and total receipts or turnover of $5 million or less) meet the criteria and are therefore required to file BOI reports.
- Domestic reporting companies:A corporation, LLC, or other entity formed under state or Indian tribal law by filing registration documents with the Secretary of State (or similar agency).
- Foreign reporting companies:A corporation, LLC, or other entity formed under foreign law that has filed papers with the Secretary of State or similar office to register to do business in a U.S. state or tribal jurisdiction.
Sole proprietorships and partnerships are not registered corporations and are therefore not required to report information about their business ownership. FinCEN has also designated 23 types of companies that may qualify for exemptions from reporting rules. If you have any doubts about whether your company is required to file a BOI report, you may want to consult with an attorney for advice.
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How likely is it that the CTA will be overturned?
Two bills currently seek to repeal the CTA. Rep. Warren Davidson (R-Ohio) introduced H.R. 8147 in the U.S. House of Representatives on April 29, 2024, followed by a bill (S. 4297) introduced by Sen. Tommy Tuberville on May 9, 2024, to overturn the law, stating that it represents “big government overreach at its worst.” More than 100 industry groups, including the National Federation of Independent Business, the National Franchise Association, and the Small Business & Entrepreneurship Council, support the repeal effort.
Will these bills pass the Senate and the House? If so, will the President sign them? When will we know?
These remain uncertainties, and as with other matters requiring Congress' attention, we may find ourselves waiting and wondering for a while.
If the law isn't repealed, what are the risks of not filing?
If the CTA remained in place and BOI reporting was mandatory, a company considered a reportable company that knowingly provided false (or fraudulent) information in a BOI report or knowingly failed to submit a complete or updated BOI report could be subject to a civil penalty of $591 for each day the violation continued (up to a maximum of $10,000) and up to two years in prison.
The reporting deadlines are as follows:
- Existing reporting companies that were incorporated or registered to carry on business before 1 January 2024 have until 1 January 2025 to submit their first BOI report.
- Beginning on or after January 1, 2024 and before January 1, 2025, new reporting companies incorporated or registered will be required to file their first BOI report within 90 days of incorporation.
- New reporting companies incorporated or registered on or after 1 January 2025 will be required to file their first BOI report within 30 days of incorporation.
- Reporting companies are required to correct errors stated in their BOI reports by filing a correction report within 30 days of realizing that the information is inaccurate.
Keep in mind that collecting the information required for a BOI report can take days or weeks depending on the size of the business and the ownership structure. Waiting for a repeal that never materializes could put business owners at risk of missing BOI reporting deadlines.
Ultimately, you will need to decide whether to act now and comply with current law, or wait to see whether it is overturned. If you choose to file a report, FinCEN provides a secure electronic filing system for reporting beneficial ownership information, the BOI E-Filing System, that is relatively easy to use.
About the Author
Nelly Acarp is a passionate entrepreneur, business expert, professional speaker, author, and mother of four children. She Corporateis a trusted resource and service provider for business formation, LLC filings, and corporate compliance services in all 50 states.
Related: Beneficial ownership rules will soon apply to millions of businesses. Is yours one of them?
