Starting January 1, 2024, most U.S. entities must comply with the Corporate Transparency Act’s (CTA) Beneficial Ownership Information (BOI) reporting requirement, implemented by FinCEN to enhance financial transparency and combat crime. This requirement mandates corporations, LLCs, and similar entities to report information about their beneficial owners—individuals who hold significant control or at least a 25% ownership stake. Required disclosures include each beneficial owner’s name, address, date of birth, and a unique identification number, such as from a passport or driver’s license. 

Entities that are newly formed or registered in 2024 in the U.S. must file their BOI reports within 90 days of creation (effective 2025 new entities will only have 30 days), while existing entities must comply by January 1, 2025. 

Exceptions to the Requirement 

There are several exceptions to the requirement, one common exemption is for a “Large Operating Company” which is a company with more than 20 full-time employees, gross receipts or sales over $5 million, and a physical presence in the U.S. Additionally, regulated entities like banks, publicly traded companies, and insurance companies are also excluded from the mandate. 

Pending Legal Challenges 

While the BOI reporting requirement for existing entities is set to take effect in just a few months, the legislation is currently facing a number of legal challenges. Several lawsuits have been filed questioning the scope and enforceability of the CTA and the BOI regulations, with arguments focused on concerns over privacy, compliance burdens on small businesses, and the potential for misuse of sensitive information. 

Given these ongoing legal disputes, there is a possibility that the implementation of the BOI requirement may be delayed or modified. 

Our Recommendation: Hold Off on Reporting for Now 

Considering the legal uncertainties surrounding the BOI requirement for existing entities that have until the end of the year, we are advising our clients to delay submitting their reports until later in the year. By postponing your filing, you can avoid unnecessary costs or complications if the courts alter or overturn portions of the reporting mandate. 

Next Steps 

In the meantime, it’s important to prepare for the potential reporting requirement by reviewing your entity’s ownership structure and identifying beneficial owners in case reporting is necessary. Gathering the required information in advance will ensure that you are ready to act quickly, should the regulation move forward without changes. 

While  Linkenheimer will not be preparing/filing BOI disclosure filings, we plan to provide additional guidance and resources to you later this fall. Hopefully we will have more clarity on the outcome of these legal challenges and how they may affect your reporting obligations. 

Conclusion 

The BOI requirement represents a significant shift in transparency for many U.S. businesses, but its future is uncertain due to pending legal challenges. We recommend holding off on reporting for now and stay tuned for further updates from us as the legal landscape surrounding the CTA and BOI continues to evolve.