The new beneficial ownership reporting

As part of the 2021 Corporate Transparency Act (the Act), many U.S. businesses are now required to provide the Financial Crimes Enforcement Network (FinCEN) with their beneficial ownership information (BOI). Effective Jan. 1, 2024, companies (other than those specifically exempted) must file a form with FinCEN (through an electronic portal) reporting data about beneficial owners. While there is no filing fee, failure to file can result in substantial civil and criminal penalties, including imprisonment.

Under the current structure, there is a risk that advising on and/or preparing these reports could be considered the unauthorized practice of law by CPAs. As a result, Baker Tilly will not advise on or assist with the preparation of BOI reporting. We recommend that you reach out to your legal representative for assistance in complying with these filings. We can, however, provide you with the following information to help you pull together necessary documentation.

FinCEN has released a Small Entity Compliance Guide, as well as new FAQs addressing reporting requirements. These materials can be a valuable tool in addressing your compliance questions.

What you need to know

Required filers

All domestic and foreign entities formed or registered to do business in the United States must file the BOI report unless they meet one or more of the 23 filing exceptions. Domestic entities are any corporation, limited liability company or other entity created by documents filed with a secretary of state or similar office under the laws of a U.S. state or Indian tribe. Foreign entities are those formed under the laws of a country outside the U.S and registered to do business in any U.S. state or tribal jurisdiction.

There are numerous exceptions, including:

• Large operating entities with over 20 employees, gross revenue of over $5 million in the prior year, and a physical presence in the United States
• Publicly traded companies registered under Sec. 102 of the Sarbanes-Oxley Act

Due dates

The BOI reporting requirements go into effect on Jan. 1, 2024. Filing due dates are as follows:

• New companies (created/registered after Dec. 31, 2023) – within 90 days of formation. A recently released Notice of Proposed Rulemaking extends this deadline to 90 days from the original 30 day window solely for reporting entities created or registered in 2024.
• There is no change to the rule that entities created or registered on or after Jan. 1, 2025 must file a BOI report within 30 days of formation.
• Existing companies (created/registered before Jan. 1, 2024) – by Jan. 1, 2025
• Companies with changes to previously reported information (i.e. ownership, address, etc.) – within 30 days of change or discovery of inaccuracy

Failure to file penalties

The BOI reporting regime carries potential civil and criminal penalties:

• Civil penalties for a violation are up to $500 per day, or
• Criminal penalties of up to 2 years of imprisonment and/or a fine up to $10,000

Information required to report

Each company must report the following entity-related information:

• Legal name of the reporting entity, as well as any trade or “doing business as” names
• Business address
• State or tribal jurisdiction of formation
• IRS taxpayer identification number

Each company must also disclose details about the beneficial owners of the entity, such as name, birthdate, address, and an image of a document with a unique identifying number (i.e., a nonexpired U.S. passport or state driver’s license).

The time to file these returns will come sooner than you think. We recommend that you reach out to your legal representative as soon as possible to ensure timely compliance.

For more information on this topic, or to learn how a Baker Tilly specialist can help, contact our team.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.