The Beneficial Ownership Information Report (BOIR) is a new requirement under the Corporate Transparency Act (CTA) for U.S. businesses. It’s designed to increase transparency in business ownership and help combat financial crimes. Most U.S. business (except sole proprietorships) are covered by this act. I have spent time in prior posts concerning this new legal mandate. Failure to file the report or filing an incomplete report can lead to substantial penalties (over $500 a day!!).
There is some additional information I will share about the reporting requirements. It is my hope that it will help you avoid the financial hit for noncompliance.
Community property consideration: There are nice community property states in the country – California being one of them. If a business is located in a community property state, the company must review the community property statute. The purpose is to determine if an owner’s spouse is deemed to have an interest in the company. Some states, like California, treat each spouse as having the same undivided interest in community assets. That means if one spouse owns at least 25% of the entity, then so does the other spouse. In that circumstance, each spouse would have to be included on the BOI report as a beneficial owner of the company.
Changes in the entity structure: Any change to the organization of a company may result in that company having to file a new report. That requirement exists if the restructured entity is considered by the state to be a new domestic reporting company. The same is true for any company that leaves one state to form in another. If a company simply changes its name (such as Widgets, LLC to Widgets Incorporated) an updated report has to be filed. That assumes that the law of the state does not treat the renamed entity as a new company.
Other state registration: If an entity files their BOI report in their state of formation, and subsequently registers in another state, it is not required to file a new or updated report.
The filing requirements under this new law seem to be a moving vehicle. With the hefty fine or penalty for making a mistake, companies really should seek legal advice and guidance from an attorney to make sure they are in full compliance. CPAs and Enrolled Agents may want to get involved in assisting clients with this filing task. The general guidance I have read is that these professionals should check with their professional liability carrier to make sure such activities are covered under their policy. If a mistake is made that results in the client being assessed a horrific penalty, the preparer of the form, assuming it was the professional’s negligence in its preparation, could face economic loss.