Farmers who operate as a corporation, limited liability company or a limited partnership need to pay close attention to a new federal law passed at the beginning of 2021 that went into effect at the start of 2024. The new law requires many farm entities and small businesses to file a beneficial ownership information report with the federal government this year.

The Corporate Transparency Act, created to curb illicit financial transactions and money laundering, requires most registered companies to complete their BOI report in 2024. Congress tasked the Financial Crimes Enforcement Network, a bureau of the U.S. Treasury, to establish and maintain a national registry of beneficial owners. Questions and answers about the reports are provided online at FinCEN.

Kristine Tidgren, an attorney and director of the Center for Agricultural Law and Taxation at Iowa State University, explained the new BOI report requirement to farmers attending a recent Iowa Farmland Owners Workshop meeting.

“The online portal to file the BOI reports opened in January 2024, and farm entities and small businesses have until Jan. 1, 2025, to file the initial reports electronically,” Tidgren said.

Follow rules for reporting

Limited partnerships, corporations and LLCs, whether single- or multiple-member, are among the entities that must report ownership, subject to limited exceptions, Tidgren said. General partnerships and sole proprietorships generally don’t have to file beneficial ownership reports.

“In these online reports, companies must provide information about the company, as well as information about each beneficial owner,” she said.

Beneficial owners include anyone who owns at least 25% of the company, as well as anyone who has “substantial control” over the business. For each beneficial owner, the company must report the name, date of birth, home address and identifying number of an acceptable proof of identification, such as a driver’s license. They must also upload an image of the identification document.

Companies that existed before the start of 2024 have until Jan. 1, 2025, to file the form, while companies created or registered in 2024 will have 90 days after their creation to file. Any company that has already filed its first report will have just 30 days to report any updates, such as a new beneficial owner or a change in address.

“This is a new law that FinCEN is enforcing this year, and we need to get the word out to farmers and others who have registered companies,” said Charles Brown, an ISU Extension farm management specialist. “Existing farm companies have a whole year before the deadline, but we are encouraging people to file sooner rather than later, so they don’t risk fines and penalties for being late.”

What to know

Tidgren recently wrote an article to help explain the new law and what farmers are required to do. The article is available on the CALT website.

“There are many important parts to this law, including who exactly must file a report, and what they must include,” Tidgren said. “This is a federal law, and our goal is to help people understand what they are required to do.”

The Corporate Transparency Act was part of the Anti-Money Laundering Act of 2020 in the National Defense Authorization Act for fiscal year 2021. The law requires FinCEN to establish and maintain a national registry of beneficial owners of entities that are otherwise not subject to disclosure regulations.

Who must file?

The rule identifies two types of companies that must report: domestic and foreign. Domestic reporting companies are entities created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.

This generally means that LLCs (including single-member LLCs), corporations and limited partnerships are required to file reports if they are not otherwise exempted from the reporting requirement. The law’s 23 exemptions from reporting generally apply only to large entities that already disclose owner information in other ways. Most tax-exempt entities, however, are not required to file reports, regardless of size.

How to file

Companies and entities that are required to file the report must do so online, at boiefiling.fincen.gov/fileboir.

If a required entity fails to file on time, penalties can be as high as $500 for each day in violation, with criminal penalties up to $10,000 and possible imprisonment.

Brown said he understands the frustration some farmers might feel about having to file another form, but it’s a federal requirement. “As a farm management specialist, my goal is to help people understand the things they must do, and this is one of those,” he said. “The law was decided by Congress, and now that it is in effect, I want to educate Iowans so they can comply.”

Who are beneficial owners?

Farmers and other small business entities may need to file beneficial ownership reports with the federal government. In general, beneficial owners are individuals who perform one of the following:

Tidgren provides this example:

In 2020, George and Marge formed GM LLC — an entity to manage their farmland. They each own 50% of the LLC. George and Marge are the only officers of the entity, which has no employees.

George and Marge are both beneficial owners of GM LLC. By Jan. 1, 2025, the LLC must file an online beneficial ownership information report with FinCEN, reporting the required information for the company George and Marge.

If GM LLC isn’t formed until 2024, they will have 90 days from the date of formation to file the BOI report. If it’s formed in 2025, they will only have 30 days to file. The 90-day period is for 2024 only.

Swoboda is an editor emeritus of Wallaces Farmer.