On January 1, 2024, a new law went into effect mandating the Beneficial Ownership Information (BOI) Report. This will require reporting all the information of a company’s beneficial owners with the U.S. Department of Treasury’s Financial Crimes Enforcement Network, also known as FinCEN.
In 2021, Congress passed the Corporate Transparency Act (CTA), which went into effect on January 1, 2024. It applies to both existing and newly formed entities with the objective of establishing uniform reporting requirements for businesses to combat tax fraud, money laundering, terrorism financing, and similar illicit activities.
Beneficial Ownership Information - Legal Requirement
This is a LEGAL requirement, not a tax requirement; therefore, CPAs have been advised that we should not prepare these filings. However, we want our clients to be aware of the requirement. BOI reporting is NOT an annual requirement. Reporting companies must file an initial report and update or correct reports as needed.
BOI Reports are due by 01/01/2025 for entities formed/registered prior to 01/01/2024. BOI Reports are due within 90 days of the formation date for entities formed/registered on or after 01/01/2024 but before 01/01/2025.
BOI Reports will be due within 30 days of the formation date for entities formed/registered on or after 01/01/2025. Additionally, if there is any change to the required information about your company or its beneficial owners in a beneficial ownership information report that your company filed (i.e. change of address, ownership change, etc.), your company must file an updated report no later than 30 days after the date of the change.
Filing your BOI Report is mandatory. The willful failure to report beneficial ownership information to FinCEN, or willfully providing false or fraudulent beneficial ownership information may result in civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure.
Which Companies Need To File A BOI Report:
Domestic Reporting Companies: Corporations, Limited Liability Companies (LLCs), and any other entities registered in any state in the U.S.
The requirement is only applicable to small businesses which are defined as businesses that either earn less than $5 million in gross receipts or have fewer than 20 full-time employees in the United States.
Entities that are not created by the filing of a document with a Secretary of State or similar state office are not required to file a BOI Report, which includes most Trusts, Sole Proprietorships, and General Partnerships.
Which Entities Are Exempt?
There are 23 business types that have been exempt from the BOI Report requirement. These business types are: Securities reporting issuers, Governmental authorities, Banks, Credit unions, Depository institution holding companies, Money services businesses, Broker or dealers in securities, Securities exchange or clearing agencies, Other Exchange Act registered entities, Investment companies or investment advisers, Venture capital fund adviser, Insurance company, State-licensed insurance producer, Commodity Exchange Act registered entity, Accounting firms, Public utility, Financial market utility, Pooled investment vehicle, Tax-exempt entity, Entity assisting a tax-exempt entity, Large operating company, Subsidiary of certain exempt entities, and Inactive entity.
An “Inactive Entity” must meet all of the following conditions in order to be exempt.
Is not engaged in active business;
Registered before 01/01/2020;
Is not owned by a Foreign person, a non-US citizen, or a non-US resident;
Is not owned by a partnership, corporation, or other estate and trust;
Has not had any ownership changes in the preceding 12-month period;
Has not sent or received any funds in an amount greater than $1,000, either directly or indirectly, in the preceding 12-month period; and
Does not hold any assets, including any entity ownership.
What Information Needs to be Reported?
Company registration details required are:
1. Legal business name and trade/DBA name (if any);
2. Current street address of the principal place of business;
3. State of company registration; and
4. Federal tax ID number.
Beneficial owner information required is:
1. Full name;
2. Date of birth;
3. Residence address;
4. ID number of acceptable government-issued ID, such as Passport or Driver’s License, and name of issuing state or jurisdiction; and
5. Clear image of acceptable government-issued ID.
Who is a Beneficial Owner?
An individual who either owns or controls a substantial percentage of the Company’s ownership (25% ownership or greater) or exercises substantial control over the Company. Ownership consists of individuals that own or control at least 25% of the Company’s ownership interests, including shares of equity, stock, voting rights, or any other mechanism used to establish ownership.
Substantial Control means an individual in any of the following 4 categories who exercise “substantial control” of the Company: senior officer (President, CEO, Manager, COO, General Counsel, etc), has the authority to appoint or remove officers or directors, important decision-makers of the company’s nature, scope, product offering, geographies, finances, sale of assets, compensation structure, amendments to governance docs, etc., or an individual with any other form of substantial control over the company.
The following are exceptions and are not included in the class of Beneficial Owners and therefore entities do not have to report that individual as a beneficial owner to FinCEN: minor children, nominees, intermediaries, custodians, agents, employees, inheritors, and creditors.
Who Can Access My BOI Report Once Filed?
BOI information will not be publicly searchable. Federal, State, and local officials who submit a request through a US Federal government agency, will be able to obtain BOI reports for authorized activities.
Financial institution regulators will have access to BOI reports when they are assessing a financial institution’s compliance with certain requirements. Financial institutions will be able to request and receive BOI Reports, however, only with the consent of the Reporting Company, and these requests will be required to be specific to an individual Reporting Company; they will not be able to request open-ended queries.
Learn More, File
The BOI can be filed here: https://boiefiling.fincen.gov/.
This site also contains helpful information in the FAQ section. Please reach out to your business attorney should you have any further questions, or need assistance with this filing.
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