The potential for harm caused by less-legitimate entities compelled Congress in 2021 to pass the Corporate Transparency Act (CTA), which created a new requirement for many small businesses (mostly LLCs and corporations) to report information on their “beneficial owners”. The main purpose is to uncover ownership within ‘Shell’ companies. The Beneficial Ownership Information (BOI) report will need to be filed with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). It requires filing contact information on those who own at least 25% of, or who otherwise have substantive control over the business. Failure to file (or file it incorrectly) will result in penalties of up to $500 per day.
Most companies with just one or a handful of owners will have relatively simple BOI reporting and we can help you complete these (for which the primary hurdle is simply remembering to submit an initial BOI report ahead of the January 1, 2025, deadline for pre-existing companies). On the other hand, companies with more complex ownership and leadership structures will need legal assistance to ensure they record all beneficial owners.
But before you begin looking at filing your BOI or whether you will be required to file, keep in mind that the CTA was ruled unconstitutional earlier this year by U.S. District Judge Liles C Burkeand is currently under appeal. It is generally accepted that this is a valuable anti-money laundering tool and will be ruled constitutional.
We’ll monitor and revisit BOI filing in November/December with our business owner clients.
Edi Alvarez, CFP®
BS, BEd, MS