As of January 23rd, 2024, the CTA reporting requirements are not enforceable due to a stay on the effective date of BOI reporting. The information in this article does not include considerations regarding the stay. Entities formed while the stay is in place should be prepared to file reports immediately if/when it is lifted (if the 30-day period has elapsed).
The Beneficial Ownership Information (BOI) reporting requirement, as mandated by the Corporate Transparency Act (CTA), has introduced new compliance obligations for millions of businesses. A common question among business owners is whether they will need to file a BOI report every year.
Initial Filing: What You Need to Know
Upon the formation of a new entity going forward or for any entity that was formed prior to 2024, an initial BOI report must be filed with FinCEN. This initial report includes:
- The legal name, any DBA or trade name, principal business address, state of formation, and Tax ID number of the entity.
- The full name, date of birth, residential address, ID number from a qualifying document, and an image of the ID (e.g., driver’s license or passport number) of each beneficial owner.
- The full name, date of birth, residential or business address, ID number from a qualifying document, and an image of the ID of the company applicant (for entities formed in 2024 and on).
The deadline for filing the initial report for an entity formed in 2024 is 90 days from formation. Those formed in 2025 and on have only 30 days to file. Entities that were formed prior to January 1, 2024, have until January 1, 2025, to submit their initial report.
Filing a BOI Report Every Year: Is This Required?
One of the key aspects of BOI reporting under the CTA is that there is no annual filing requirement. Unlike other regulatory filings that may need to be submitted on an annual basis, BOI reports are only required when there is a change in the reported information. This means that once you have filed the initial BOI report, you do not need to file again unless there is a change in beneficial ownership information.
However, it is important to note that you must file an updated BOI report within 30 days of any change to ensure that FinCEN has the most current information.
Situations Requiring Updated Filings
While there is no annual filing requirement, there are specific circumstances under which an updated BOI report must be submitted:
- Changes in Beneficial Ownership: If an individual who was previously reported as a beneficial owner no longer meets the criteria, or if a new individual becomes a beneficial owner, an updated report is required.
- Changes in Information: If there are changes to the information previously reported about a beneficial owner, such as a change of address or a new identifying number, an updated report must be filed.
- Changes in Entity Information: If the entity registers a new DBA or moves to a new principal address, it will need to be reported. If the entity completely moves state jurisdictions or converts from a Corporation to an LLC resulting in a change in legal name, this should also be reported.
Note: Changes in company applicant information do not require an updated report to be filed. If a company applicant moves to a new business address, the company does not need to file an updated report for this.
Penalties for Non-Compliance
Failure to comply with BOI reporting requirements can result in significant penalties, including:
- Civil penalties of up to $591 per day for each day the violation continues.
- Criminal penalties, including fines of up to $10,000 and imprisonment for up to two years.
Ensuring timely and accurate BOI reporting is essential to avoid these penalties and maintain compliance.
Best Practices for Compliance
To stay compliant with BOI reporting requirements, consider the following best practices:
- Regularly Review Ownership Information: Periodically review beneficial ownership information to identify any changes that may require an updated BOI report.
- Establish a Process: Create a standard way for beneficial owners to communicate a change in their information so that it will be reported to FinCEN. Consider having beneficial owners obtain FinCEN Identifier’s.
- Use Compliance Software: Utilize compliance software to streamline the reporting process and ensure that all filings are timely and accurate.
- Stay Informed: Remain up to date with any changes to BOI reporting regulations and guidelines to ensure ongoing compliance.
Conclusion
While there is no requirement to file a BOI report every year, it is important to stay vigilant and ensure that any changes in beneficial ownership information are promptly reported – this could result in three filings a year or one every three years. By understanding the requirements and implementing best practices for compliance, businesses can avoid penalties and have peace of mind.