Starting January 1, 2024, most LLCs must file a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN), not the IRS, under the Corporate Transparency Act. This requires disclosing personal information (names, DOBs, addresses, IDs) of beneficial owners (those owning ≥ 25 % ≥ 2 5 % or controlling the LLC) to prevent financial crimes.
The Corporate Transparency Act (CTA) was enacted January 1, 2021, as part of the National Defense Authorization Act. The Corporate Transparency Act requires certain entities (primarily small and medium-size businesses) to report “beneficial ownership” information to the Financial Crimes Enforcement Network (FinCEN).
A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report.
Generally, members of LLCs filing Partnership Returns pay self-employment tax on their share of partnership earnings. If the LLC is a corporation, normal corporate tax rules will apply to the LLC and it should file a Form 1120, U.S. Corporation Income Tax Return.
Exemptions from Beneficial Ownership Information (BOI) reporting under the Corporate Transparency Act (CTA) cover 23 types of entities, including large operating companies (over 20 employees, $5M sales), publicly traded companies, banks, credit unions, insurance companies, and tax-exempt organizations, with a major change exempting all U.S.-formed companies (formerly "domestic reporting companies") and their U.S. owners as of a March 2025 FinCEN rule, focusing reporting primarily on foreign entities registered to do business in the U.S.
Summary. Under the CTA, an LLC (unless an exemption applies) is a “reporting company” that must file a beneficial ownership information report via the Beneficial Ownership Secure System (“BOSS”) interface and database.
A beneficial owner is someone who owns at least part of a property or other asset, even if its legal title is owned by someone else. That person can also vote on or otherwise influence decisions regarding transactions involving that asset or property. An example is a corporate shareholder.
In a nutshell, sole proprietorships do not have to file a BOI report to FinCEN. However, if your business takes off and you decide to form an LLC or a corporation, you'll be required to report your BOI.
If it's been two or three years since you filed your LLC taxes, the IRS will file a substitute return for you. This return will not include any deductions, credits, write-offs, or exemptions and will likely result in a larger tax and penalty bill.
The disadvantages of an LLC include potential challenges such as self-employment taxes, which can be higher than corporate taxes, and difficulties in raising capital compared to corporations. LLCs may also face complexities in transferring ownership and incur relatively high state fees and taxes.
The Corporate Transparency Act (CTA) requires entities, including corporations, limited liability companies, and limited partnerships, to file a beneficial ownership information (BOI) report with the Financial Crimes Enforcement Network (FinCEN), a division of the US Treasury Department.
In 2021, Congress lowered the threshold for reporting income on payment apps from $20,000 and 200 transactions annually to $600 for a single transaction. Implementation is being phased in over three years.
Many states require LLCs to file an initial report shortly after formation and annual or biennial reports thereafter. These filings keep your company in good standing and often involve a small fee.
An LLC can avoid double taxation by electing to be taxed as a pass-through entity. If the LLC has just one member, that owner can be taxed as either a disregarded entity ( and pay business tax on their individual return) or an S Corporation. Either will help them avoid double taxation.
Common tax return mistakes that can cost taxpayers
LLC tax write-offs are ordinary and necessary business expenses you deduct from revenue to lower taxable income, including rent, salaries, insurance, marketing, utilities, and startup costs (up to $5,000 initially). Key deductions often overlooked include home office expenses, bank fees, vehicle use, education, and the self-employment tax deduction for single-member LLCs. Proper record-keeping, like separating finances and tracking mileage, is crucial for claiming these deductions.
What if I have no income but have business expenses? If you're a member (owner) of an LLC that has business expenses but no income, you'll often still need to file a federal tax return. This is because expenses, including deductions, are considered a business activity subject to federal reporting requirements.
If your LLC is taxed according to the default rules the members cannot be considered as employees and cannot receive a salary. However, if you choose to have the LLC taxed as a corporation, the members who actively work for the LLC can be considered employees and can receive a salary.
Hurt Your Credit & Reputation
It's not just about today—it impacts your future, from investments to loans, or simply keeping your options open. But if you leave your LLC sitting around as “inactive” or, even worse, suspended, it can seriously hurt your business credit.
You need to file a Beneficial Ownership Information (BOI) report if you have a U.S. company (like an LLC, corporation, or partnership) that isn't exempt, but as of March 2025, the requirement was revised to primarily focus on foreign companies registered to do business in the U.S., with most domestic companies now exempt. Exemptions exist for large companies, nonprofits, banks, and public companies, while the rules now mainly target foreign entities registering in the U.S. and their beneficial owners.
Hidden ownership structures pose compliance risks; identifying red flags like complex structures, false documents, and offshore ties ensures regulatory adherence. Hidden ownership structures can create serious challenges for regulated firms, especially in industries where transparency is non-negotiable.
Registered owners (or record holders) receive a proxy and cast votes directly with the company that issues the shares. Beneficial owners, on the other hand, receive a “voting instruction form” directing their brokerage firm or other financial institution how to vote their shares.