There has been a lot of attention given to the new FinCEN Beneficial Ownership Information (BOI) reporting and the horrific penalties for failing to comply. The entities with the filing requirement (discussed below) are those that were in existence on January 1, 2024, as well as those created in 2024 and later.
What entities are required to report?
The requirement for reporting includes single-member LLCs, small multi-member LLCs, small S corporations, and small C corporations. These entities may be required to provide detailed reporting on their beneficial owners—the people who own or control these entities. The reporting requirement also applies to LLCs that own rental properties.
The reporting mandate applies to small corporations and LLCs with:
- 20 or fewer full-time employees.
- $5 million or less in domestic gross receipts reported on their prior tax return.
- A physical U.S. presence.
What is the penalty for not complying with the new regulations?
This is the scary part. To ensure compliance, the penalties for willfully violating the Business Ownership Information (BOI) reporting requirements include
- Civil penalties of up to $591 for each day a violation is not remedied.
- A criminal fine of up to $10,000.
- Possible imprisonment of up to two years.
There is no limit to the number of people subject to these penalties. Senior managers, corporate entities, and others can be held liable for willful violations of the BOI filing rules, including:
- Anyone who willfully files a false or fraudulent BOI report on a company’s behalf.
- Anyone who willfully provides false information to the filer of a BOI report.
- Beneficial owners who willfully fail to file a BOI report or file a false report, including corporate officers, directors, or employees and LLC members, employees, and trustees.
Why was this regulation passed, and when are the reports due?
The purpose for the new regulations is to enhance transparency, making it more difficult to conceal illicit activities through anonymous corporate structures. Covered entities must timely file their initial report and remember to report any changes within 30 days. The rules are effective for both new and existing entities in 2024:
- New entities must file within 90 days of formation.
- Existing entities (those in existence before 2024) must file their initial report on or before January 1, 2025.
Ignoring the new reporting requirements is not an option—staying current on these changes is key to navigating this new landscape successfully. Remember that the failure to file the report timely and accurately can lead to $591 a day in Civil Penalties, $10,000 in Criminal Penalties, and potentially up to two years in prison.
More detailed information is available on the FinCIN website: https://www.fincen.gov/boi