The Corporate Transparency Act (CTA) has been effective all year, but a very important deadline is fast approaching. All LLCs and corporations, as well as some trusts created before 2024, must register with the federal government by January 1, 2025. Farms that created a business entity in 2024 were required to register with the federal government within 90 days. If you’ve missed that deadline, now is the time!
The point of this registration process is to tell the federal government who owns the business entity. The federal government has not had access to this information previously, as business entities are governed by state law. The federal registration process is called a “beneficial ownership information” (BOI) report, which can be completed here.
For a video walk-through of how to complete the BOI report, click here. Read below for more information on the specifics and particulars of this report.
Who is required to file?
The law requires any business entity formed by registering with a state or tribe to file a BOI report.
Sole Proprietorships and Partnerships
Sole proprietors and partnerships are not generally formed by registering with the Secretary of State’s (or other state equivalent) office. They are formed simply by engaging in business transactions. A farmer whose business is a sole proprietorship or general partnership will not, in most cases, need to file a BOI report with the federal government.
However, Delaware, Hawaii, and Louisiana require general partnerships to file formation paperwork, and therefore, in those states, general partnerships will also need to file a BOI report.
Some tribal governments enable the formation of business entities within their jurisdictions. Farmers who have formed a business entity under tribal law must also register with the federal government.
“I filed paperwork with my state as a DBA or doing business as so I could use a tradename. Do I need to file a BOI report because I did that?”
No, filing a DBA or other tradename or trademark paperwork does not, itself, trigger an obligation to file a BOA report. Filing a DBA doesn’t create a business entity; it merely creates a fictitious name for an already-existing business. (Of course, if the DBA or trade name is attached to an LLC or corporation, then that obligation to file a report on the LLC or corporation remains.)
Nonprofit Organizations
Tax-exempt nonprofit organizations are exempt from the BOI reporting requirements. A tax-exempt nonprofit organization comprises two related but distinct parts. First, the state formation paperwork is based on the state’s nonprofit corporation statute. Secondly, there is the IRS application for tax-exempt status. Only non-profit organizations that have applied and secured tax-exempt status with the IRS are exempt from the CTA. Any other nonprofit organization must still file a BOI report.
Some nonprofit organizations are formed under state laws but have yet to apply for IRS tax-exempt status, are awaiting IRS response, or do not intend to apply for it. Yet other nonprofit organizations once had tax-exempt status, but their mission or activities have changed, and their tax-exempt status has been revoked. In any of these cases, the nonprofit organization must file a BOI report.
Trusts
Some states require trusts to register with the state and FinCEN. Remember, the deciding factor is whether or not the entity’s formation paperwork has to be filed with the state or tribe. If so, a BOI report must also be filed.
What do I have to report?
BOI reports require more personal information than most state filings require.
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Name of business and any trade names (DBAs)
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Tax Identification Number (SSN or EIN)
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Where the business is registered
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US Address of business
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Each owner’s full legal name, date of birth, complete current address, copy of their driver’s license, state/local/tribe-issued identification, or passport (US or foreign) OR each owner’s already-procured FinCEN ID.
Owners have the option of using a FinCEN identification. This is a way to report personal information to FinCEN and receive an identification number for the BOI report. A business with multiple owners will benefit the most from having owners secure a FinCEN ID before filing. That way, each owner just needs to provide the person filling out the report with their FinCEN IDs and not all the multiple data points that FinCEN wants on file.
Getting a FinCEN ID is relatively easy. You make an account here, enter your identifying information, and upload the identification you will use for your account. The FinCEN system immediately provides you with a FinCEN identification number that can be used on the BOI report.
What happens if I do not report?
The CTA is quite serious about compliance. People who willfully fail to report or willfully provide false information on a BOI report are subject to civil penalties of up to $500/day for each day of noncompliance or criminal penalties of up to two years imprisonment or a fine up to $10,000.00.
BOI reports are a one-time filing unless company information changes. Plan to complete the BOI report as soon as possible so you won’t have to worry about it anymore!
Typically, small businesses might be exempt from federal business regulations. Not this time! Because small companies can be used to launder money, cover corruption, or enable tax fraud–all activities the CTA is intended to prevent, the typical exemptions are inverted. Under the CTA, large businesses are exempt, whereas small businesses are required to comply with the CTA’s extra layer of registration.
More Resources
The best resource for instructions or more information is FinCEN itself. Download their Small Entity Compliance Guide here.
If you have questions about registration that aren’t addressed here, please contact our Staff Attorney, Chloe Johnson, at chloe@farmcommons.org.