Transparency in Farm Entities

Jan 14, 2024 | Uncategorized

Transparency in Farm Entities

In an effort to prevent the use of shell companies for money laundering or tax evasion, Congress established the Corporate Transparency Act. This creates a comprehensive database of the individual owners behind corporate entities. And it affects many common farm legal entities, such as LLCs, LPs, and Corporations. Essentially, any entity that was formed by registering with your secretary of state.

The gist is – if you own or control at least 25% of a company, you’ll most likely have to file a “beneficial ownership information” report with the federal government. And no, there’s no exemption for small, rural, or farm entities.

The Financial Crimes Enforcement Network (FinCEN) is responsible for gathering this beneficial ownership information through the filing of reports (BOIR). And it’s serious stuff, as FinCEN can impose severe civil and criminal penalties for non-compliance, such as up to $500 per day a violation continues and up to a $10,000 fine + 2 years of imprisonment.

Now that we’ve been properly alarmed, here’s some key points:

  • Corps, LLCs, and other entities formed with the Secretary of State must file the report, unless exempt. (there’s 23 exemptions) 
  • Reports are due between 1/1/24 and 1/1/25 for existing entities
  • Companies formed after 1/1/24 have 90 days to file.
  • Reports must include company details: legal name, address, EIN
  • Reports must include beneficial owners’ details: legal name, birthdate, home address, photo ID
  • A beneficial owner is ANY individual who, directly or indirectly exercises substantial control over a reporting company; or owns or controls at least 25% of the reporting company.
  • That means CEO, CFO, manager, etc who may not own the company will need to file as well.

There’s basically 5 steps to take:

  1. Determine if your entity is a reporting company
  2. Determine who the beneficial owners are
  3. Gather beneficial ownership information
  4. File the initial BOI report
  5. Maintain compliance with any ownership changes in the future.

It’s just one more thing small business owners are mandated to comply with. So, if you have an LLC, LP, C-corp, S-corp, or don’t know…

I’d recommend speaking with your attorney and/or tax person to clear up any questions you may have.

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