As the Corporate Transparency Act (CTA) comes into effect on January 1, 2024, many business owners are seeking clarity on the new requirements surrounding Beneficial Ownership Information (BOI) reports.
This article will explore whether partnerships are required to file a BOI report and the implications of these requirements for different types of partnerships.
Understanding BOI Reporting
A Beneficial Ownership Information report is a document that identifies the individuals who own or control a reporting entity. The primary goal of this reporting requirement is to enhance transparency in business ownership and combat financial crimes such as money laundering and fraud.
Under the CTA, certain entities, including partnerships, must file these reports with the Financial Crimes Enforcement Network (FinCEN).
Key Information Required in a BOI Report
When filing a BOI report, partnerships must provide several critical pieces of information, including:
- Full legal name of the partnership
- Any trade names or “doing business as” (DBA) names
- Current U.S. street address
- State or Tribal jurisdiction of formation
- Tax Identification Number (TIN), including Employer Identification Number (EIN)
- Information about beneficial owners, such as their names, addresses, and identification numbers
- Copy of ID, Driver’s License or Passport
Are Patnerships Required to File a BOI Report?
Partnerships are generally classified as “reporting companies” under the CTA if they are created or registered in the U.S. by filing a document with a secretary of state or similar office. This classification means that most partnerships will be required to file a BOI report, unless they qualify for one of the specified exemptions.
Types of Partnerships
General Partnerships: These partnerships are typically formed by two or more individuals who share ownership and management responsibilities. As reporting companies, general partnerships must file a BOI report.
Limited Partnerships (LPs): In a limited partnership, there are both general partners and limited partners. General partners manage the business and have unlimited liability, while limited partners have limited liability and typically do not participate in management. Limited partnerships are also required to file a BOI report.
Limited Liability Partnerships (LLPs): LLPs offer protection from personal liability for the partners, similar to corporations. Like other partnerships, LLPs must file a BOI report as they are considered reporting companies.
Exemptions from BOI Reporting
While most partnerships will need to file a BOI report, there are specific exemptions outlined in the CTA:
- Large Operating Companies: Partnerships that meet the criteria for large operating companies—those with more than 20 full-time employees, a physical office in the U.S., and over $5 million in gross receipts—are exempt from filing.
- Certain Nonprofits: Although most nonprofits are exempt from BOI reporting, partnerships that operate as nonprofits may also qualify for exemptions.
- Other Exempt Entities: There are 23 categories of entities that are exempt from BOI reporting, including publicly traded companies and certain regulated entities.
Compliance and Penalties
Partnerships that are required to file a BOI report must do so accurately and within the designated timeframe. The deadline for filing depends on when the partnership was created or registered:
- Partnerships created before January 1, 2024: Must file by January 1, 2025.
- Partnerships created on or after January 1, 2024: Must file within 90 days of their creation.
Failure to comply with the BOI reporting requirements can result in severe penalties, including civil fines of up to $500 per day, with a maximum penalty of $10,000, and potential criminal penalties of up to two years in prison for willful violations.
In summary, most partnerships will be required to file a BOI report under the Corporate Transparency Act, as they are classified as reporting companies. Understanding the specific requirements and potential exemptions is crucial for compliance.
Partnerships should consult with legal or financial professionals to ensure they meet their reporting obligations and avoid penalties.
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