This column is normally focused solely on Estate Planning issues. This article is no different, but we are going to focus on just one particular asset that has seen a change in Federal law. Many of my clients own a small business.
Some of these businesses simply hold property, like a home. Many times the home is used as a rental. This can be a great source of income if managed well. If you need help with managing a rental, I am happy to recommend a property management company you will be pleased with. Placing your rental in an LLC is almost always a good idea to limit your liability in the case of an accident on the property. No matter what the purpose or use of your small business may be, this article is for you.
Report is Required by Federal Law
Today we will focus on a new federal law that recently went into effect. This law applies to all small business owners. A small business in this case is defined as having fewer than 20 employees. If you own a small business, you will now be required to report to FINCEN, (the U.S. Financial Crimes Enforcement Network) the identity of all those in control of the business as well as all members owning more than 25% interest in the company.
This new law came about as there are many people who have been avoiding paying taxes and/or laundering money obtained through criminal means. Many states, including Utah, did not require the owners of companies to report owners, consequently making it easier for criminals to hide their actions. The new law will make business owners and managers visible to the government and financial institutions.
What If I Don’t File?
Failure to register your company will leave you in danger of being civilly fined up to $5,000 for each violation. Criminal penalties allow for an additional fine as well as up to 5 years in prison. It is unlikely that the many people who fail to respond immediately will be going straight to prison. It is possible they will pay significant fines.
When Do I Need To File?
If you created your business before January 1, 2024, you have until December 31, 2024 to register with FINCEN. If you created your business during 2024, you have 90 days from the date of filing to register with FINCEN. If you create your business one January 1, 2025 or later, you will have 30 days to register.
Can I File On My Own?
Yes, many people have filed the initial report on their own. You can do this using FINCEN’s official portal: https://boiefiling.fincen.gov. When you visit their website, you will have the option of simply typing in the information on their website, or printing out their form to fill out, scan and send to FINCEN.
If you go to the official government website, there is no cost to file. Watch out for companies that will pretend to be FINCEN, but will charge you money to do all of the work yourself. I have read about people believing they submitted their filing on the government website, but they paid $189 and did not receive a confirmation. If you use the actual government website above, there will be no charge and you will receive an instant confirmation that your filing was received.
Some of the companies charging to assist you are legitimate, but others are only scams. If you need a referral, I can connect you with someone in Utah that will help you for a reasonable price.
What Am I Filing?
It’s called the Beneficial Ownership Information Report (BOIR).
What Will I Need to Complete the Report?
Your official business name, and any DBAs for your business.
Your business tax ID number.
Names, addresses, and birth dates of owner.
Photo of your Driver’s license or passport.
How Long Will It Take?
The initial report can normally be completed in about 10 minutes.
Is This Really That Important?
Yes it is. The U.S. government has a history of sending criminals to prison based on their financial records. This new law will make it even easier for the government to find and prosecute criminals. To make the new law work, everyone will need to register their business. The only way to enforce this is to fine and otherwise pursue anyone that fails to submit the report.
The good news is that filing the report takes only a small amount of time.
