New Pennsylvania and Federal Reporting Requirements for Businesses
Two new laws have recently been enacted that may affect businesses in Pennsylvania, including limited liability companies and real estate holding companies. The laws are directed at compelling disclosure of the current ownership interests in a business. More importantly, both carry significant penalties for non-compliance.
Report to FinCEN:
In 2021, Congress passed the Corporate Transparency Act (CTA), which creates a new Beneficial Ownership Information (BOI) reporting requirement. Corporations, limited liability companies (LLCs), and numerous other entities created by the filing of a document with a secretary of state must file. Certain types of entities are exempt, such as many non-profit entities.
If a business existed on or before January 1, 2024, then it must file the initial report by January 1, 2025. If the business was created on or after January 1, 2024 but before January 1, 2025, then it must file the initial report within ninety (90) days after its creation or registration is effective. This report is not an annual requirement, and it only needs to be submitted once, unless you need to update or correct the initial report.
The BOI filing is important as the failure to file can result in penalties as high as $500.00 per day for each day beyond the filing deadline.
Annual Report to the Pennsylvania Department of State:
In 2022, Governor Wolf signed into law Act 122 of 2022, which created an annual reporting requirement for domestic and foreign filing businesses.
The deadline for this initial report is not until 2025. Specifically, the deadline for: (1) domestic and foreign business and nonprofit corporations is June 30, 2025, (2) domestic and foreign limited liability companies is September 30, 2025, and (3) all other associations is December 31, 2025, and annually thereafter.
Each year, the Department of State will send businesses a notice of the filing requirement at least two months before the annual report is due. To ensure that these reminders are received, businesses should make sure that the registered address for the business is correct.
Recent Update:
On December 3, 2024, the Federal court of the Eastern District of Texas issued a preliminary nationwide injunction against the Beneficial Owner Information (BOI) reporting requirements of the CTA.
The court concluded that the CTA is likely unconstitutional as it is outside of Congress’s power. Therefore, at least in the short-term, neither the CTA, nor the reporting rule may be enforced, and reporting companies need not comply with the January 1, 2025 BOI reporting deadline.
However, the court’s order is a preliminary injunction only and not a final decision. Enforcement may resume pending further order of the court, so it is important to monitor these developments. The filing requirement is likely to resume at some point, so completing the BOI filing by January 1, 2025 is still in the best interest of most businesses.
