The Corporate Transparency Act (CTA) went into effect on January 1, 2024. This legislation mandates the creation of a comprehensive government database containing the identities and contact details of specified small corporations and LLCs “beneficial owners.” These beneficial owners are individuals who either own the entity or wield significant control over it. Law enforcement and security agencies will utilize this database to combat the misuse of shell companies for activities such as money laundering, tax evasion, and terrorism.
Beneficial Ownership Secure System
To adhere to this law, both new and existing small businesses are required to submit a Beneficial Ownership Information (BOI) report to the Financial Crimes Enforcement Network (FinCEN) under the Department of the Treasury. Entities established during 2024 subject to the CTA must file a BOI report within 90 days of formation, while those formed before 2024 have until December 31, 2024, to comply.
These reports are submitted electronically through a newly established federal database named BOSS (Beneficial Ownership Secure System), with no associated filing fee. It’s important to note that the information stored in the BOSS database is strictly confidential and intended for government agency use only—it will not be publicly disclosed.
Now, let’s address some common queries:
- Do I need to file a BOI report for my single rental property held within an LLC?
Yes, every active LLC owner must file a BOI report, regardless of the number of properties owned, unless the LLC qualifies as a “large operating company” exempt from reporting. - If I own 11 rental properties, each in a separate LLC, do I need to file 11 separate BOI reports?
Yes, unless any of the rentals qualify as large operating companies exempt from reporting. - Can my CPA file the BOI report on my behalf?
While CPAs can interpret tax law for IRS compliance, filing BOI reports may constitute an unauthorized practice of law. It’s advisable to consult legal experts or insurance providers regarding potential liabilities. - How many individuals can be subject to penalties for non-compliance?
Both individuals and entities can face penalties for willful violations of BOI reporting rules. With no set limit on the number of liable parties. - Are self-employed individuals or partnership partners required to file BOI reports?
Generally, self-employed individuals and most partnerships are exempt from filing, unless formed through official state filings. - What if my business lacks a physical address?
The BOI report must include the current street address of the reporting company’s principal place of business, excluding P.O. boxes or attorney addresses. - Are only CPA firms subject to Sarbanes-Oxley exemptions from BOI reporting?
Not exclusively. Public accounting firms registered with PCAOB or large reporting companies may also be exempt. - Is the registered agent responsible for BOI report filing?
No, although some may offer this service. - Can I use an ITIN instead of a Social Security number in the BOI report?
Yes, each beneficial owner should provide their unique identifying number from specified documents. - Do I need to name my attorney in the BOI report?
For companies formed after January 1, 2024, the individual who filed the articles of incorporation must be listed. Along with a business address and identification number. - Will a change in beneficial ownership trigger a new BOI report?
Yes, companies must update their BOI reports within 30 days of any ownership changes. - If I gifted shares to my child, do I need to include them as a beneficial owner?
Not while they are minors, but an updated BOI report must be filed once they become adults. - Why would a criminal file a BOI report?
Failure to file can result in significant penalties, and global trends indicate the effectiveness of centralized BOI filing in combating financial crimes.
In summary, the 2024 implementation of the CTA signifies a substantial shift in reporting obligations for small corporations and LLCs in the U.S., with a focus on combating financial crimes through enhanced transparency. It’s crucial for affected entities to understand and comply with these new requirements to avoid potential penalties.
Disclaimer: This is not legal advice, consult an attorney for legal advice or contact us.
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