Beginning January 1, 2024, many domestic and foreign registered companies are now required to report information about individuals who own or control them to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of Treasury. The Corporate Transparency Act creates this new obligation in an effort to curb money laundering and other financial crimes by promoting transparency in entity ownership, ultimately making it harder for individuals to hide and benefit from their ownership of American companies.

Here are some key takeaways to help determine whether your business needs to file a beneficial ownership information (BOI) report with FinCEN, what information must be disclosed, and when the BOI report must be filed.

What companies are required to file a BOI report with FinCEN?

Companies required to submit a BOI report are referred to as “reporting companies.” All domestic entities created by the filing of a document with a secretary of state are reporting companies. Each company that meets the definition of a reporting company must file its own BOI report.

Reporting requirements also extend to certain foreign entities registered to do business in the United States.

There are, however, twenty-three (23) types of entities that are exempt from the BOI reporting requirements. These entities include tax-exempt entities such as non-profit organizations, inactive entities, regulated and public entities and “large operating companies”. Large operating companies are privately held companies that employ more than 20 full time employees and reported more than $5 million in gross receipts or sales in its tax consolidated return, and have a substantial presence in the US, among other qualifications.

What information must be included in a reporting company’s BOI report?

The BOI report requires a reporting company to disclose (1) reporting company information, (2) company applicant information; and (3) beneficial owner information.

Reporting Company Information – The reporting company must provide information about itself such as its legal name, any trade or assumed names, principal place of business address, jurisdiction of formation, and Taxpayer Identification Number.

Company Applicant Information – A company applicant is the individual who files or is primarily responsible for filing the company’s creation document with the secretary of state. Disclosing information about a company applicant applies only to reporting companies created on or after January 1, 2024. The reporting company must report each company applicant’s name, date of birth, address, and an image and identifying number from a passport or driver’s license.

Beneficial Owner Information – A beneficial owner is any individual who at the time of filing either (1) directly or indirectly exercises substantial control over the company (i.e., the individual is a senior officer, has authority to appoint or remove the company’s officers, directors, or members, is an important decision-maker, or has any other form of substantial control over the reporting company); or (2) owns or controls at least 25% of the company’s ownership interest. The reporting company must report each beneficial owner’s name, date of birth, residential address, and an image and identifying number from a passport or driver’s license.

When is a reporting company’s BOI report due?

The FinCEN website to electronically report BOI is now live and available at https://boiefiling.fincen.gov. The deadline to file a BOI report depends on when a domestic reporting company was created.

• If a company was created before January 1, 2024, it must file a BOI report before January 1, 2025.
• If a company is created between January 1, 2024 and January 1, 2025, it must file a BOI report within 90 days after receiving notice that its creation is effective.
• If a company is created after January 1, 2025, it must file a BOI report within 30 days after receiving notice that its creation is effective.

The BOI information submitted through FinCEN will not be publicly available. There is no fee charged to submit a BOI report.

There is also no annual reporting requirement. However, it is important to note that a reporting company must file an updated BOI report within 30 days after the date of any change to the reporting company information or beneficial owner information. If any information previously submitted is inaccurate, a corrected BOI report must be submitted within 30 days after the company becomes aware of the inaccuracy.

Are there penalties for violating BOI reporting requirements?

Yes. If a person willfully violates the BOI reporting requirements, they may be subject to civil penalties up to $500 for each day the violation occurs and to criminal penalties up to two years in prison and a fine of up to $10,000.

Be prepared. To avoid these potentially significant penalties, it is critical that every business carefully analyze whether it is a reporting company, disclose all of the required information in the initial BOI report, and timely update and correct outdated or inaccurate information as needed. If your business has any questions regarding the new Corporate Transparency Act reporting requirements, contact Joanne Sommers and Ali Sylvia at Plews Shadley Racher & Braun LLP to help you navigate this novel statute.

The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter.

Categorized: News

Tagged In: BOIreport, business, Corporate Transparency Act, finCEN