Farming is a business. As such, perhaps you’ve organized under the veil of an LLC or Corporation.

While operation under one of these entities is usually recommended for your farm, due to the passage of the Corporate Transparency Act, those with ownership stakes in small entities must file a Beneficial Ownership Information report moving forward, yet most people don’t know what that means.

We’re going to talk about your requirements to comply with these new regulations and potentially avoid negative consequences.

I’m neither an accountant, nor an attorney. For further information on this matter beyond this brief overview, you should discuss your requirements with the other members of your legal and financial team.

What is the Corporate Transparency Act?

The Corporate Transparency Act (CTA) Act became federal law January 1, 2021 aiming to crack down on money laundering and other illegal financial activities. A part of the National Defense Authorization Act, the CTA’s intent is preventing money laundering, terrorist financing, corruption, and tax fraud.

As of January 1, 2024, many small business owners (including farmers) will be required to file with FinCEN their beneficial ownership information, with filing dates determined by when the entity was originally formed.

Who is a beneficial owner and what information do they need?

A beneficial owner is defined in the legislation as an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise exercises substantial control over the entity or owns or controls at least 25% of the ownership interests in an entity.

Each beneficial owner, to comply with federal law, must file with the Treasury’s Financial Crime Enforcement Network (FinCEN) their Beneficial Ownership Information (BOI).

When completing your initial filing, you’ll be asked for several pieces of personal identifiable information:

• Full legal name
• Date of birth
• Current residential or business street address
• Unique identifying number from an acceptable identification document
  • Passport, driver’s license or government issued ID
• FinCEN Identifier

To avoid potential criminal fines and prison sentences, your BOI must be filed within the time limits afforded you by the CTA.

When does it need to be filed?

Filing dates depend on when the entity began. If the farm entity was formed prior to January 1, 2024, you will have until January 1, 2025 to make your initial BOI filing with FinCEN. However, if your entity was formed after January 1, 2024, you’re given 90 days from the date of organization to submit your initial filing.

Furthermore, these filings must be updated as conditions associated with your initial BOI filing change, such as change of address or ownership percentages, among others. If you need to make changes to your BOI, you have up to one year to submit an amended filing after these changes were made.

What happens if I don’t file?

Failure to comply with the BOI filing subjects you and the other beneficial owners of your farming entity to civil penalties of $500 for each day of noncompliance. You may also face a fine of up to $10,000 and a sentence of up to 2 years in prison.

Why didn’t I know about this?

Many farmers and other small business owners may not know about their newfound filing responsibilities under this legislation. The purpose of this blog is to provide a broad overview and assist with the avoidance of financial and other penalties in the instance you were unaware of your obligation. If you didn’t know about BOI filings prior to now, I urge you to talk with your legal and financial team, as well as conduct additional research – beyond the scope of this blog – into this matter.

Is the CTA Constitutional?

This is a tough question to answer currently. On March 1,2024, a Federal Court in the Northern District of Alabama ruled in the case National Small Business United vs. Yellen that the CTA is unconstitutional. This ruling has placed a temporary stay on the filing requirement, but only as it applies to the roughly 65,000 members of National Small Business United, and not as a blanket vacatur for the nation’s small enterprises. Additionally, the Treasury filed a notice of appeal on March 11, 2024 contesting the ruling on the constitutionality of the CTA. While the appeals process plays out, those who are required to file their BOI with FinCEN should continue doing so to avoid criminal penalties if the judgment is reversed on appeal.

 

While you may not have known about your obligation to file your BOI prior to this afternoon, we at Richey-Barrett Insurance wanted to ensure you were aware of these new requirements and potential penalties associated with noncompliance. Your farm is your business and should be adequately protected financially. We take our obligations of helping you do so seriously and are happy to provide you some additional information on this little-known requirement. Prior to your next insurance renewal, contact us to discuss other ways to help you protect yourself, your family, and your farming entity.