With the January 1, 2025, beneficial ownership information (BOI) reporting deadline looming for those entities formed prior to January 1, 2024, FinCEN has released two dozen more FAQs.
Highlights of the FAQs address the following:
- Unauthorized practice of law: FinCEN confirms that state law generally governs whether a third-party service provider submitting a BOI report is engaged in the unauthorized practice of law. Spidell is unaware of any state taking the position that submitting a BOI report is the unauthorized practice of law. However, Spidell strongly encourages tax professionals to contact their malpractice insurance carriers to see if this service is included in professional liability coverage (FAQ B.9);
- Impact of community property laws: Businesses must look to each state’s community property law to determine whether a spouse of an owner with at least a 25% ownership interest in the reporting company is also a beneficial owner (Spidell note: Under California’s community property law, spouses each own an undivided interest in the whole of community property, so if one spouse owns a 25% interest in a company, both spouses are treated as if they own a 25% interest and should be reported as beneficial owners.) (FAQ D.18);
- Impact of entity conversions: An entity that undergoes a conversion must file a new BOI report if under the state law a conversion results in the creation of a “new” domestic reporting company. A new report is also required if an entity ceases to exist in one state and forms in another state. An updated report, and not a new initial report, must be filed if under state law a new entity is not created because of the conversion, but the entity’s name is changed (e.g. ABC, Corp. to ABC, LLC) (FAQ C.18); and
- Registration in other state(s): Once an entity files an initial BOI report in the jurisdiction in which it is formed or initially registers, it does not have to file another or updated report if it subsequently registers in another state(s) (FAQ C.19).
The updated FAQs are available at:
Sign up for Spidell’s 2024/25 Federal and California Tax Update and see why more than 18,000 tax pros choose Spidell each year. Click here for details.
