Business owners: A new filing requires your attention in 2024

This Q&A is based on questions we receive from clients, just like you. Have a question that involves a dollar sign? Share it! Our planners and subject matter experts will help answer them in upcoming issues of Inside Personal Finance. Send us your questions here.

Q:

I’m passionate about being a small-business owner, but it’s not without its challenges. I have partners, but I feel like I do it all sometimes. On top of it all, I’ve been told that the government is requiring that small businesses need to file some new form this year or else face a penalty. What’s this new filing and what are the deadlines?

A:

Running a small business can be one of the most rewarding endeavors, but it will test you. New regulations and filings don’t help, but here we are. 

And you’re right. As of Jan. 1, 2024, the Beneficial Ownership Information Reporting Rule and Beneficial Ownership Information Access and Safeguards Rule require that different kinds of U.S. companies, like S-corps and LLCs, disclose personal information to the federal government about the companies’ beneficial owners, senior officers and anyone with a controlling interest. 

Why? Because the U.S. wants to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures. That’s why the filing is with the Treasury’s Financial Crimes Enforcement Network.

What’s a beneficial owner? It’s an individual who either directly or indirectly has substantial control over the company or owns at least 25% of the company.

Please work with your tax attorney to help you with this filing’s complexities, which include determining whether your company is exempt or not. In general, a company that may need to file is registered with a secretary of state as a corporation, LLC or some other entity. In addition, a trust that owns one of these entities may also have a reporting obligation under this new act. There are 23 business categories that are exempt.  

For example, a sole proprietorship is not a reporting company (not registered to do business) and doesn’t need to file a BOI report but a single-member LLC taxed as a sole proprietorship will be subject to this rule, assuming the entity has its own EIN and filed registration documentation with a secretary of state.  

Confused yet? That’s why you need to consult your tax attorney on this and do it as soon as possible because there may be civil and criminal penalties imposed for not filing (including accountability for senior officers). The deadline schedule is as follows: