The purpose of this PayDay article is to provide our clients/readers with practical tips on how to complete your “first time ever” BOI reports. I recently completed four “beneficial ownership information” reports for two corporations and two LLC’s. My opinion is that you do not need to pay an expert to file these reports for you (they are not much more difficult than your bi-annual Secretary of State reports), BUT IT IS IMPORTANT THAT YOU FILE YOUR INITIAL REPORTS BEFORE THE END OF 2024. Penalties of $500+ per day for “willful failure” to file these reports can be imposed, so it is best to simply file your reports by December 31, 2024 and then move on to other items——A report takes about 20 minutes to complete, which you can do online and submit directly to the FinCEN unit of the US Treasury.
WHAT IS THE PURPOSE OF THESE BRAND NEW BENEFICIAL INFORMATION REPORTS (BOI reports)?
The US Treasury is wanting to know “who” the beneficial owners of corporations, LLC’s and partnerships are to help them monitor the flow of funds and investigate potential money laundering/tax evasion schemes. So-called “shell companies” are often used to hide “dirty money” and the Corporate Transparency Act of 2021 is now requiring information about the owners and others who control various legal entities established with each state’s Secretary of State. (I expect some cross-referencing between each state’s Secretary of State and the US Treasury to find entities reporting to the Secretary of State who have not filed the required BOI reports.)
WHO IS NOT REQUIRED TO FILE A BOI REPORT AND CAN IGNORE THE REST OF THIS PAYDAY ABOUT PRACTICAL TIPS?
- Corporations which are tax-exempt/non-profits as defined in IRS Code Section 501(c) are not required to file a report—-think churches, charities, chambers of commerce, and other non-profit organizations.
- Sole proprietorships—-Think filing a Schedule C with your personal Form 1040—-Sole proprietorships are not required to file a document with the Secretary of State and, as such, are not required to file a BOI report
- “Certain large companies” are also not required to file a BOI report. A “large company” is a corporation, LLC or partnership which BOTH employs more than 20 full-time employees AND has annual gross receipts/sales exceeding $5 million per year
NOTE – Large Companies, as defined above are not required to file BOI reports, but many of them are associated with S Corps or LLC’s which own real estate rented to the large company. Some of these rental LLC’s are owned by S Corps, etc. and are “disregarded entities” which do not file annual tax returns since they are reported in the S Corporation annual corporation tax return.
WHO IS REQUIRED TO FILE A BOI REPORT BY 12/31/24?
Corporations, limited liability companies (LLC’s) and partnerships are all generally created by filing legal documents with a Secretary of State. A business operating in “corporate form, as a LLC or partnership” and which is not a “large company”, per above, is required to file BOI reports. The US Treasury wants to know who the “beneficial owners” and responsible parties are for these smaller for-profit (or investment companies) legal entities. A beneficial owner of a company is any person who directly or indirectly owns 25% or more of a legal entity.
PRACTICAL TIPS ON HOW TO GET READY TO FILE YOUR BOI REPORTS ONLINE WITH FinCEN/US TREASURY
- Identify which entities you are involved with to determine if the entity is exempt from filing, per the above, or is not exempt and should file—–write down the exact legal name and federal EIN since required on the BOI.
- If you cannot find the federal EIN for one or more of your legal entities (this especially applies to disregarded entities/LLC’s which have not filed annual federal income tax returns), call the IRS number for looking up your EIN at 800-829-4933—–be prepared to know the year your entity was formed and other personal information—–requires a person who is intimately familiar with the legal entity so they can answer IRS questions to obtain the EIN’s.
- Identify the ownership group of each entity, knowing that every beneficial owner must have their name, date of birth and home address reported on the BOI reports.
- Make sure you have copies of the front page of every beneficial owners’ drivers licenses since they are required to be uploaded into the BOI reporting website.
HOW TO FILE ONCE DETAILS OF INFORMATION ARE COMPILED, PER THE ABOVE
Visit the FinCEN BOI e-filing website. Special rules exist IF your legal entity was formed after the end of 2023—-for those legal entities in existence as of 12/31/23, the legal due date of the initial BOI report is 12/31/24. While on the FinCEN website, you may wish to read the Small Entity Compliance Guide, a nice summary of those required to report, due dates, and line by line instructions.
Next, fill in the information required on the BOI report—–some of the questions are not straight-forward, but review them on the Small Entity Compliance Guide or simply do the best you can! I filed our information directly online at the website instead of in “pdf” form—-just seemed easier.
Once completed, submit and you will get confirmation of filing, which you can download to verify you filed your BOI report
PAY FOR SOMEBODY TO FILE FOR YOU
I have seen various groups “pop up” advertising they will file your BOI reports for fees, no differently than those who will file your Secretary of State reports for compensation. The problem is they will need personal information from you to file your reports and the process is simple enough for a “DIY” filing of your BOI—–BUT using your accountant or other outside consultant is better than not filing your BOI report!!
CONCLUSION
Set aside an hour or so to identify which entities are your “reporting entities,” gather the above-referenced information required for your BOI filing, and simply go to the FinCEN government website and file your BOI reports—–one time and done. (Rules do exist for future changes to your BOI reports, but at this time you simply need to file your initial BOI reports by year-end 2024!!)
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This PayDay is for educational purposes only and does not constitute tax and/or legal advice. Any links to external resources are for educational purposes only. AccuPay is not affiliated with nor receives any renumeration from any outside sources. Please consult with your tax and/or legal advisor before applying any suggestions made here or through external links.