What Is BOI Reporting and How Does It Affect LLCs?
Beneficial Ownership Information (BOI) reporting is a new requirement for many U.S. businesses, including Limited Liability Companies (LLCs). As a financial advisor, I've seen increasing concern among my clients about these new regulations. This post will explain BOI reporting, its implications for LLCs, and how to navigate this new landscape.
Understanding BOI Reporting
BOI reporting is a mandate under the Corporate Transparency Act (CTA), which came into effect on January 1, 2024. The Financial Crimes Enforcement Network (FinCEN) now requires certain companies to report information about their beneficial owners [1].
A beneficial owner is an individual who:
- Owns or controls at least 25% of the company
- Exercises substantial control over the company
The goal? To combat financial crimes like money laundering and tax evasion.
Who Needs to Report?
Most LLCs fall under the reporting requirements. Exceptions exist, but they're limited. If your LLC was:
- Created before January 1, 2024: You have until January 1, 2025, to file
- Created in 2024: You have 90 days from formation to file
- Created on or after January 1, 2025: You have 30 days to file [2]
What Information Is Required?
For each beneficial owner, you'll need to provide:
- Full legal name
- Date of birth
- Current residential address
- Unique identifying number (e.g., passport or driver's license number)
You'll also need to submit similar information about the company itself [3].
How BOI Reporting Affects LLCs
The impact on LLCs is significant:
1. Administrative Burden
Many LLCs, especially smaller ones, will face a new administrative task. This includes gathering required information and submitting it to FinCEN.
2. Privacy Concerns
Some LLC owners worry about privacy. The information submitted isn't public, but certain government agencies can access it.
3. Compliance Costs
While filing is free, there may be costs associated with gathering and organizing the required information.
4. Penalties for Non-Compliance
Failing to report or providing false information can result in civil and criminal penalties. These include fines up to $10,000 and imprisonment for up to two years [4].
Steps for LLC Owners
As a financial advisor, I recommend LLC owners take these steps:
1. Determine if your LLC needs to report
2. Identify all beneficial owners
3. Gather required information
4. File the report with FinCEN
5. Keep records of your filing
6. Update information as needed (within 30 days of any changes)
The Broader Impact
BOI reporting is part of a global trend towards financial transparency. It aims to:
- Prevent financial crimes
- Enhance national security
- Align the U.S. with international standards
For legitimate businesses, this change shouldn't be overly burdensome. However, it does require attention and compliance.
Challenges and Concerns
Some challenges have emerged:
1. Awareness
Many small business owners are unaware of this new requirement. Education and outreach are crucial [5].
2. Legal Challenges
A federal court in Alabama ruled the CTA unconstitutional in March 2024. However, this ruling only applies to specific plaintiffs. For most businesses, the reporting requirement remains in effect [6].
3. Data Security
With sensitive information being collected, data security is a concern. FinCEN assures that robust security measures are in place [7].
How Financial Advisors Can Help
As a financial advisor, I'm helping my clients navigate BOI reporting by:
1. Educating them about the requirements
2. Assisting in determining if they need to report
3. Guiding them through the information gathering process
4. Advising on potential impacts on their business structure
5. Helping to ensure ongoing compliance
Looking Ahead
BOI reporting is likely here to stay. It's part of a broader effort to increase financial transparency and combat illicit activities. As we move forward, we may see:
- Refinements to the reporting process
- Increased integration with other financial reporting systems
- Potential expansion of reporting requirements
Key Takeaways
1. Most LLCs need to report beneficial ownership information to FinCEN
2. The deadline for existing companies is January 1, 2025
3. Required information includes details about beneficial owners and the company
4. Non-compliance can result in significant penalties
5. Financial advisors can provide valuable assistance in navigating these requirements
Conclusion
BOI reporting represents a significant change for many LLCs. While it adds a new compliance requirement, its aim is to create a more transparent and secure financial system. As your financial advisor, I'm here to help you understand and comply with these new regulations, ensuring your business remains in good standing while contributing to a more secure financial landscape.
Remember, staying informed and proactive is key. If you have questions about how BOI reporting affects your LLC, don't hesitate to reach out to a financial advisor or legal professional.
Meet
Drew Martino
Hello there 👋🏼 I'm Drew Martino, and I bring over 20 years of experience in financial services, specializing in retirement planning, retirement income, investment selection, and custom asset allocation models.
Citations:
[2] https://www.fincen.gov/boi
[4] https://www.legalzoom.com/articles/how-the-corporate-transparency-act-affects-llcs-llps-and-inc
[6] https://www.journalofaccountancy.com/news/2024/aug/boi-reporting-requirements.html
[8] https://tax.thomsonreuters.com/blog/how-boi-reporting-combats-tax-fraud/
Material prepared herein has been created for informational purposes only and should not be considered investment advice or a recommendation. Information was obtained from sources believed to be reliable but was not verified for accuracy. It is important to note that federal tax laws under the Internal Revenue Code (IRC) of the United States are subject to change, therefore it is the responsibility of taxpayers to verify their taxation obligations.
Savvy Wealth Inc. is a technology company. Savvy Advisors, Inc. is an SEC registered investment advisor. For purposes of this article, Savvy Wealth and Savvy Advisors together are referred to as “Savvy”. All advisory services are offered through Savvy Advisors, while technology is offered through Savvy Wealth. The views and opinions expressed herein are those of the speakers and authors and do not necessarily reflect the views or positions of Savvy Advisors
What Is BOI Reporting and How Does It Affect LLCs?
Beneficial Ownership Information (BOI) reporting is a new requirement for many U.S. businesses, including Limited Liability Companies (LLCs). As a financial advisor, I've seen increasing concern among my clients about these new regulations. This post will explain BOI reporting, its implications for LLCs, and how to navigate this new landscape.
Understanding BOI Reporting
BOI reporting is a mandate under the Corporate Transparency Act (CTA), which came into effect on January 1, 2024. The Financial Crimes Enforcement Network (FinCEN) now requires certain companies to report information about their beneficial owners [1].
A beneficial owner is an individual who:
- Owns or controls at least 25% of the company
- Exercises substantial control over the company
The goal? To combat financial crimes like money laundering and tax evasion.
Who Needs to Report?
Most LLCs fall under the reporting requirements. Exceptions exist, but they're limited. If your LLC was:
- Created before January 1, 2024: You have until January 1, 2025, to file
- Created in 2024: You have 90 days from formation to file
- Created on or after January 1, 2025: You have 30 days to file [2]
What Information Is Required?
For each beneficial owner, you'll need to provide:
- Full legal name
- Date of birth
- Current residential address
- Unique identifying number (e.g., passport or driver's license number)
You'll also need to submit similar information about the company itself [3].
How BOI Reporting Affects LLCs
The impact on LLCs is significant:
1. Administrative Burden
Many LLCs, especially smaller ones, will face a new administrative task. This includes gathering required information and submitting it to FinCEN.
2. Privacy Concerns
Some LLC owners worry about privacy. The information submitted isn't public, but certain government agencies can access it.
3. Compliance Costs
While filing is free, there may be costs associated with gathering and organizing the required information.
4. Penalties for Non-Compliance
Failing to report or providing false information can result in civil and criminal penalties. These include fines up to $10,000 and imprisonment for up to two years [4].
Steps for LLC Owners
As a financial advisor, I recommend LLC owners take these steps:
1. Determine if your LLC needs to report
2. Identify all beneficial owners
3. Gather required information
4. File the report with FinCEN
5. Keep records of your filing
6. Update information as needed (within 30 days of any changes)
The Broader Impact
BOI reporting is part of a global trend towards financial transparency. It aims to:
- Prevent financial crimes
- Enhance national security
- Align the U.S. with international standards
For legitimate businesses, this change shouldn't be overly burdensome. However, it does require attention and compliance.
Challenges and Concerns
Some challenges have emerged:
1. Awareness
Many small business owners are unaware of this new requirement. Education and outreach are crucial [5].
2. Legal Challenges
A federal court in Alabama ruled the CTA unconstitutional in March 2024. However, this ruling only applies to specific plaintiffs. For most businesses, the reporting requirement remains in effect [6].
3. Data Security
With sensitive information being collected, data security is a concern. FinCEN assures that robust security measures are in place [7].
How Financial Advisors Can Help
As a financial advisor, I'm helping my clients navigate BOI reporting by:
1. Educating them about the requirements
2. Assisting in determining if they need to report
3. Guiding them through the information gathering process
4. Advising on potential impacts on their business structure
5. Helping to ensure ongoing compliance
Looking Ahead
BOI reporting is likely here to stay. It's part of a broader effort to increase financial transparency and combat illicit activities. As we move forward, we may see:
- Refinements to the reporting process
- Increased integration with other financial reporting systems
- Potential expansion of reporting requirements
Key Takeaways
1. Most LLCs need to report beneficial ownership information to FinCEN
2. The deadline for existing companies is January 1, 2025
3. Required information includes details about beneficial owners and the company
4. Non-compliance can result in significant penalties
5. Financial advisors can provide valuable assistance in navigating these requirements
Conclusion
BOI reporting represents a significant change for many LLCs. While it adds a new compliance requirement, its aim is to create a more transparent and secure financial system. As your financial advisor, I'm here to help you understand and comply with these new regulations, ensuring your business remains in good standing while contributing to a more secure financial landscape.
Remember, staying informed and proactive is key. If you have questions about how BOI reporting affects your LLC, don't hesitate to reach out to a financial advisor or legal professional.
Meet
Drew Martino
Hello there 👋🏼 I'm Drew Martino, and I bring over 20 years of experience in financial services, specializing in retirement planning, retirement income, investment selection, and custom asset allocation models.
Citations:
[2] https://www.fincen.gov/boi
[4] https://www.legalzoom.com/articles/how-the-corporate-transparency-act-affects-llcs-llps-and-inc
[6] https://www.journalofaccountancy.com/news/2024/aug/boi-reporting-requirements.html
[8] https://tax.thomsonreuters.com/blog/how-boi-reporting-combats-tax-fraud/
Material prepared herein has been created for informational purposes only and should not be considered investment advice or a recommendation. Information was obtained from sources believed to be reliable but was not verified for accuracy. It is important to note that federal tax laws under the Internal Revenue Code (IRC) of the United States are subject to change, therefore it is the responsibility of taxpayers to verify their taxation obligations.
Savvy Wealth Inc. is a technology company. Savvy Advisors, Inc. is an SEC registered investment advisor. For purposes of this article, Savvy Wealth and Savvy Advisors together are referred to as “Savvy”. All advisory services are offered through Savvy Advisors, while technology is offered through Savvy Wealth. The views and opinions expressed herein are those of the speakers and authors and do not necessarily reflect the views or positions of Savvy Advisors
