As part of our commitment to keeping you informed, we want to ensure you're aware of the upcoming BOI filing requirements under the Corporate Transparency Act (CTA). Compliance with these regulations is crucial to avoiding penalties and ensuring your business remains in good standing.
Most business entities with fewer than 20 full-time employees and less than $5 million in sales or gross receipts (as reported on federal tax returns) will likely be required to complete the BOI disclosure.
While Brinker Simpson & Company does not directly manage BOI filings, we’re here to provide the resources and information you need to stay compliant with these critical regulations.
Key Deadline: January 1, 2025
As the filing deadline approaches for entities formed before this year, we wanted to share insights from our clients' experiences with the BOI reporting process, both positive and negative.
The FinCEN website (https://fincen.gov/boi) has proven to be straightforward and user-friendly. From the landing page, you'll find FAQs, educational materials, the application for a unique identifier, and the portal for filing the BOI report.
However, some clients have found determining whether they need to file and preparing the report overwhelming. Below are some tips and strategies to simplify the filing process.
Don't be frightened – you may not need to file!
The CTA applies to entities formed by filing a document with a secretary of state's office, such as corporations, LLCs and limited partnerships. Entities formed by other means, like sole proprietorships, family planning trusts, employee retirement plan trusts, or general partnerships/joint ventures, are not required to file a BOI report.
If you own a company subject to the CTA, your company may still come under one of 23 exemptions, which the FinCEN website summarizes at https://fincen.gov/boi-faqs#C_2. If you're not inclined to click on yet another link, there are three broad categories of exemptions:
1. Entities that are already subject to heavy federal reporting requirements and where, in many cases, the reports are available to the public—for example, publicly traded entities that file reports regularly with the SEC or tax-exempt entities under Internal Revenue Code section 501(c) that file form 990 returns with the IRS.
2. Entities with a low-risk profile for engaging in money laundering or similar activities – for example, a government instrumentality or a company with more than 20 employees, a permanent office in the US and $5 million or more gross receipts per year.
3. A 100%-owned subsidiary of an entity in “(1)” or “(2)” above.
First Step – Identifying the "VIPs"
If you do need to file a BOI report, you still don't need to fret - with a bit of homework, you can file the report with just a few clicks. The first and most demanding step is identifying three categories of individuals:
1. For companies formed in 2024 or later, the "company applicant" means the person who oversaw the filing of the formation documents (in many cases, this will be your attorney);
2. For any company, any "live human" with substantial control over the entity's affairs (each a "beneficial owner"), such as the entity's managers, directors and "high-level" officers (CEO, CFO, Secretary, COO);
3. For any company, any "live human" who directly or indirectly owns 25% or more of equity (as with "(2)" above, each is also a "beneficial owner") is a "beneficial owner."
The item "(3)" above is the most complicated because it requires tracing ownership through the chain of intermediary entities where an individual may hold an interest until you reach a live person. However, if you learn an owner is exempt from reporting, you can indicate so on the report and stop the inquiry there.
Second Step – Decrease the Admin Burden
Once you've identified the company applicant and beneficial owners, the next step is critical to removing the "nightmare" from the reporting process. For each person you've identified, you'll need to provide private personal information (name, address (usually residence) and an identifying document such as a passport or driver's license). To decrease the administrative burden, you should convince each individual to get their own unique identifier number from the FinCen website.
A unique identifier is similar to a TSA Pre-Check Number – an applied-for identifier consolidating all the applicant's personal information in one place. You can then input the identifier instead of each person's private information into the BOI report. And, if the person updates the information associated with their identifier, that update auto-populates across all companies the identifier was applied to.
Anyone can sign up for an identifier through www.login.gov, which many people already use to access TSA Pre-Check, Global Entry and even some state motor vehicle departments online.
The application is relatively simple – a single page that asks for name, address and identification card information (i.e., driver's license or passport).
Make sure to keep a photo of your identification method handy so you can drag and drop it into the identifier number application.
The key selling point? The identifier number application should only take 10 minutes!
Third Step - Collect and Submit
Once you have everyone's unique identifiers, the rest of the process is just a matter of data entry. To file the BOI report, you can download a PDF to fill out and submit or e-file online. Either way, you will need to fill in the blanks. For example, filling in the company applicant's information should be as simple as populating their identifier number into the blank spaces.
The PDF and the online website will have some visual differences, but the content is the same. As you move through, there will be blank spaces, drop-down menus and check-boxes.
If you choose to use PDF, make sure to read the instructions at the top of the PDF. The key is to use the "validate" and "finalize" buttons at the top of your report before submission and then "print to PDF." The online website will reject forms that haven't been validated, finalized and printed.
Once the website accepts the submitted application, it will send you a receipt. Keep a copy of that receipt for your records. Since this reporting regime is new, we don't know yet what all the complications will be, but holding onto proof of submission is a reasonable practice.
See, it's not a "nightmare"…right?
As always, making your best effort to comply is always better than not reporting at all. Although you may see articles discussing monetary fines and even imprisonment for non-compliance, FinCen has said those sanctions are for "willful" violations of the CTA (a deliberate attempt not to comply or evade detection while knowing the filing requirements).
For now, FinCEN is more interested in encouraging compliance and expanding its outreach efforts. Note, however, that this landscape is ever-evolving – in fact, a federal district court in Alabama has ruled that Congress didn't have the necessary power to enact the CTA. So, as the courts do their best to figure out the filing landscape, keep making the best efforts to file and update your BOI reports.
Deadlines to Remember and Helpful Links
Existing companies (as of January 1, 2024)
↪️File by January 1, 2025.
New companies (registered between January 1, 2024, and January 1, 2025)
↪️File within 90 days of formation.
New companies (registered after January 1, 2025)
↪️File within 30 days of formation.
🔗 E-File Online Step-by-Step Instructions
How Brinker Simpson Can Help
Although we do not facilitate BOI filings, our team is here to provide guidance and ensure you can access the necessary resources. Don't hesitate to contact us if you have questions or need help understanding the BOI filing requirements.