Last year, The Orlando Law Group shared the need for your business to file your Beneficial Ownership Information with the federal government this year. It is part of the Corporate Transparency Act that was passed in 2020 but just became effective on January 1.
As you might have seen, earlier this month, a federal court in Alabama declared the government overreached its constitutional authority by requesting this information.
While we are monitoring the court battles, at this time we are still recommending all business owners continue as if the filings are still required.
The attorneys at The Orlando Law Group can help businesses determine if they are required to file their Beneficial Ownership Information and file all the required documents for you.
What is the Beneficial Ownership Information?
As a recap of the issue, privately owned small businesses, for the most part, do not have to file any sort of public disclosures in the way that companies listed on a stock exchange must do every quarter.
Unfortunately, too many criminals are using fake companies for money laundering and other crimes. It is very difficult to track criminal activity without a subpoena.
That is why, in 2021, the federal government passed the Corporate Transparency Act, hoping to provide more tools for law enforcement to find terrorists, money laundering, counterfeiting and more.
Yes, just like how we take off our shoes at the airport because of an act of terrorism, law-abiding small businesses will now have to file additional information with the government because of criminals.
Who is required to file Beneficial Ownership Information today?
If you are a small business with fewer than 20 employees and annual revenues of less than $5 million, you most likely will need to file.
There are 21 specific exemptions, like companies in the investment and financial realms. Most organizations who file as a 501(c) with the IRS are exempt. And large businesses are exempt.
For businesses that have multiple LLCs, such as a real estate firm that owns multiple properties or a restaurant group with each location a separate entity, this could mean filing a separate Beneficial Ownership Information for each one!
If you have to file each LLC with SunBiz or any other Secretary of State, then each LLC needs to file separate Beneficial Ownership Information.
How does the court ruling impact these businesses?
Remember, there are many steps in the process of determining if a law passed by Congress and signed by the President is constitutional. In some cases, it takes years to move through the court system and can eventually be decided by the U.S. Supreme Court.
National Small Business Association, et al. v. Janet Yellen, et al. was filed in November 2022 in federal court. It took until March for the court to issue an opinion on the law.
While it sounds like a relief for everyone, the opinion was quite narrow, only granting relief to named plaintiffs and members of the National Small Business Association. According to news reports, there are 65,000 member businesses covered under their membership with the association.
Chances are that your business is not one of them.
After all, there are more than 30 million small businesses in the United States according to the U.S. Small Business Administration. And you can’t join now and be included in the court case.
Even if you are a member of the association, you should still prepare your Beneficial Ownership Information as the federal government plans to appeal the decision. That means the injunction providing relief could be overturned at any time.
What happens if a business does not report?
Remember from our first article on this issue, that the penalties for not filing are harsh. According to the federal government:
“The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure.”
Keep in mind, that this is not like filing with the State of Florida, where the fine is relatively small for not filing. This is an effort of the Financial Crimes Enforcement Network division of the United States Treasury.
These are the people who spend every moment looking for criminals breaking the law to protect us.
While the federal government says, “willful failure,” that term could apply to your actions if you “forget” to file or do not realize you need to file. It is still to be determined how that will be treated.
It is certainly not something any business would want to be the test case for. Plus, pay attention to that last line of the government’s warning that says senior officers of the company can be held personally accountable for a failure to file.
The attorneys at The Orlando Law Group can help your businesses prepare for this requirement as we understand business and represent clients in business law and more in Orlando, Waterford Lakes, Altamonte Springs, Winter Garden, Lake Nona, St. Cloud, Kissimmee, and throughout Central Florida.
If you have questions about anything discussed in this article or other legal matters, give our office a call at 407-512-4394 or fill out our online contact form to schedule a consultation to discuss your case. We have an office conveniently located at 12301 Lake Underhill Rd, Suite 213, Orlando, FL 32828, as well as offices in Seminole, Osceola and West Orange counties to assist you.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.
Last Updated on March 15, 2024 by The Orlando Law Group
