Brand new requirements for LLCs and similar U.S. businesses took effect at the start of 2024. Under the Corporate Transparency Act, just about every business that is registered with a Secretary of State’s Office, like corporations and LLCs, must provide a Beneficial Ownership Information (BOI) report to the Financial Crimes Center at the Federal Department of Treasury,

Why is this required? The federal government is trying to crack down on criminals who conduct money laundering and organized crime through shell corporations – ever seen Ozark on Netflix? Basically, congress figured the best way to keep track of whether entities are being operated legitimately is to track all of their owners.

“Beneficial Ownership” probably isn’t what you think. To start, anyone who “exercises substantial control” over a reporting company might be a beneficial owner. That means senior officers, board members, important decision-makers, and anyone with any other form of substantial control is considered a beneficial owner.

Naturally, actual owners are also considered beneficial owners but only if they own 25% of an entity. Sounds straightforward … It’s not!!!

To understand just how wild and confusing this can get, I want you to imagine the typical family farm. If you’re a lifelong city dweller, when I say “typical family farm” you probably imagine a big red barn, a few acres, a couple of rows of corn, and an assortment of barnyard animals. That’s not what I’m talking about.

Instead, imagine a multi-departmental enterprise. A second-to-fourth generation family business that has 2,000 – 10,000 acres of crops, owns pastureland where they run 200 – 4000 head of cattle, grows hay to feed their herd, sells surplus hay, and occasionally dabbles in other business – renting equipment to neighbors, providing custom cutting services, machining, welding, selling homemade leather goods and horseshoe art, you name it.

That family farm usually isn’t all wrapped up in one entity and it’s almost never owned by one person. Here is what it might look like.

****A quick note. The diagram below isn’t legal advice. It’s also not an entity structure I am recommending. I’m calling this diagram the “typical family farm” for a reason. If parts of it sound like your family business, it is because your business is “typical” of the grain and cattle industry. It is not representative of any particular agricultural enterprise.

Here’s what makes BOI Reports confusing.

(1) To start, this family business isn’t one entity. It’s made up of two corporations and five LLCs. That means there may be five separate beneficial ownership reports that need to be filed.

(2) Who are the beneficial owners of Family Farm Corporation? Son, Daughter, and Grandma all own at least 25% BUT:

What about Son and Daughter’s spouses? In a community property state, their spouses are equal owners in their community property – but is it community property? What about Son’s prenup?
What about the trust and trustee? If Auntie is the one calling the shots, should she be listed as a beneficial owner?

(3) What about Smith Family Farm Co.? Grandma doesn’t directly own any shares, but she owns 50% of Family Farm Corp which owns 50% of Smith Family Farm Co. … does that make her a 25% beneficial owner?

(4) What about Local Monument LLC and State Monument LLC? Is Family Farm Corporation the beneficial owner or does it pass through and Grandma, Son, and Daughter are the beneficial owners?

(5) What about Grandpa’s Ranches LLC? Family Farm Corporation only owns 20% of Grandpa’s Ranches, LLC but it owns half of Smith Family Farm Co., which owns the other 80% of Grandpa’s Ranches LLC. Does that make Family Farm Corporation a beneficial owner of Grandpa’s Ranches LLC?

Frankly, it’s all confusing as hell – and that’s without taking into consideration the other dynamics at play, like leasing arrangements with distant cousins, financing arrangements, and the inevitable side businesses the grandchildren are bound to form.

Keep in mind, this new law isn’t an agricultural thing. It affects practically every industry and the consequences of screwing things up are steep. There are civil penalties of up to $500 for each day that a violation continues and criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000 (for willfully failing to file or reporting fraudulent information).

The good news is, I’m not here for fear-mongering! I’ll discuss and clarify many of these reporting requirements on Instagram and Facebook over the next few weeks.

I’m also here to tell you that The Longhair Lawyer can help you with BOI reports at low flat rates. If you own a single-member organization, you can schedule a 15-minute consultation for $60. If you represent a multimember organization or an organization owned by an entity, you can schedule a 30-minute consultation for $120.

With both consultations, you will receive: (1) an exemption analysis (explaining whether your business must file); (2) a summary of who your beneficial owners are; (3) a Guide to FinCEN Identifiers (important for filing); and (4) Instructions for Self-filing with screenshots from the Department of Treasury website.

If you represent multiple entities, you can schedule an initial 60-minute consultation for $240. The goal of the consultation is to gather the information needed to put together the same report created in the shorter consultations. For some, that can be done in 60 minutes. For others, additional work will be necessary. That additional work will be billed at $225/hour.

Naturally, The Longhair Lawyer will also file for you if you decide you don’t want to do it on your own. That fee is $80 per entity.

Let’s tackle this together and get it done now! Entities that existed on or before January 1, 2024, have until the end of the year to file. Time is on your side, but procrastination will lead to disaster. Millions of businesses and LLC owners will wait until later in the year. When filing volume gets high, it will become very difficult for you to get the assistance your business needs.

– Tyler O’Brien –

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