While the mid-point of the year has been crossed, little new information has been learned about how the litigation of the corporate transparency act will play out (A summary of the Corporate Transparency Act can be found here). However, FINCEN, the governing body that this law falls under, has released some additional information on who needs to file. This is not great news for many current and former business owners.
The new guidance explains that businesses that were dissolved after January 1, 2024 will also be subject to Beneficial Owner reporting. This means that even if you have closed a business this year, you need to file a report. This is frustrating for many business owners that were hoping to avoid the hassle and cost of more paperwork for their old businesses. In addition, business owners should make sure that the business is fully dissolved. Even if a final tax return has been filed, the business must be dissolved under the rules of the state to be considered closed for the purposes of the BOIR filing.
Also be aware that many inactive entities need filings as well. In order for a entity to get exempt for inactivity, the business must meet all of these criteria:
(a) existed on or before January 1, 2020
(b) are not engaged in active business
(c) are not wholly owned, directly or indirectly, by a foreign person
(d) have not experienced a change of ownership in the last 12 months
(e) have not sent or received more than $1,000 in the last 12 months
(f) do not otherwise hold any type of asset, including ownership interest in another entity
The businesses subject to this new rule are the same as before, but it had previously been believed that companies ceasing to operate this year would not have to file. As long as the business was formed prior to Jan 1, 2024, the deadline to file is the end of the year. If the business was created this year, the 90 day deadline would be in effect.
All together, these clarifications may add additional guidance, but don’t clear up some of the bigger questions at hand. Additional updates will be sent as we learn more, but for now, the original deadlines for new and existing businesses remain the same. If you are looking for our assistance in filing your Beneficial Owner reports prior to the December 31 deadline, please make sure to complete the form at this link so that we can plan resources accordingly. There are no extensions for late filing and penalties are very high.
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