Beneficial Ownership Information Reporting 2024-2025

Recent Developments on the Corporate Transparency Act

A federal district court in Alabama has declared the Corporate Transparency Act unconstitutional, issuing an injunction to prevent the government from compelling the plaintiff to adhere to BOI reporting requirements. The court found that small businesses are unduly impacted by the necessity to report sensitive personal information, as well as the financial burden associated with compliance. Until further judicial proceedings occur, possibly involving an appeal by the U.S. Treasury, only the 65,000 members of the National Small Business Association who were part of the lawsuit will be affected and will not be required to fulfill BOI reporting obligations.

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Interested in our BOI Reporting solution? Clients can access it through Echeverri Income Tax Services.

Beginning in 2024, numerous businesses classified as reporting companies—primarily LLCs, S corporations, and C corporations—will face new reporting obligations under the Corporate Transparency Act (CTA). This requirement from the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) aims to thwart and combat money laundering by mandating certain businesses to disclose their Beneficial Ownership Information (BOI).

Who Qualifies as a Beneficial Owner?

Several factors are considered in identifying a beneficial owner, which includes an individual who, directly or indirectly: 

• Exerts significant control over a reporting company 
• Holds or manages 25% or more of the ownership interests in a reporting company.

There are two distinct types of reporting companies that exist in the corporate landscape: the Domestic Reporting Company (DRC) and the Foreign Reporting Company (FRC). Both categories encompass various forms of business entities, including corporations and limited liability companies. Regardless of their classification, both DRCs and FRCs are required to file specific documents with the secretary of state or a similar regulatory office to ensure compliance with legal standards. However, the fundamental difference between the two lies in their formation processes. A Domestic Reporting Company (DRC) is established through the formal filing of its incorporation or organizational documents within the jurisdiction where it operates. In contrast, a Foreign Reporting Company (FRC) is created under the laws of a country outside the United States and must undergo the necessary registration process to legally conduct business within the U.S. This distinction is crucial for understanding the compliance requirements and operational frameworks of each type of reporting company.

However, certain entities are exempt from these regulations. For instance, large operating companies, public utilities, specific financial institutions, and insurance companies could qualify for exemptions if they fulfill all necessary criteria. In total, there are 23 exemptions available, so it’s advisable for your business to consult legal counsel to determine if you meet the requirements for exemption.

Please note that while not explicitly mentioned in FinCEN’s rule, sole proprietorships and general partnerships may also be exempt.

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How Does My Business File a BOI Report?

The electronic filing system is available and the form to report BOI can be accessed online.

What Is the Deadline for BOI Reporting?

As of Jan. 1, 2024, newly formed entities have 90 days from the date of receiving notice that the company’s creation or registration has become effective to file their BOI report. As of Jan. 1, 2025, all businesses required to report will have 30 days from establishment or registration to file.

Businesses in existence prior to Jan. 1, 2024, that meet the criteria to report BOI must file by Jan. 1, 2025.

What Information Is Required on a BOI Report?

A reporting company must report:

• Legal name
• Any trade names, DBAs, or trading as names
• Current street address of its principal place of business
• Its jurisdiction of formation or registration
• Taxpayer ID#

Beneficial owners must report:

• Individual’s name
• Date of birth
• Residential address
• An ID# from an acceptable ID document (passport, U.S. driver’s license, and name of issuing state or jurisdiction of the ID document
• Must supply an image of the ID document and it cannot be expired