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What is “Beneficial Ownership Information” reporting, and why do I care?

What is “Beneficial Ownership Information” reporting, and why do I care?

By: Dean Dorton | December 13, 2023

Beneficial Ownership Information reporting is a crucial mandate impacting over 30 million businesses in 2024. Discover why organizations must take heed and comply with this new federal law. Learn about filing deadlines, exemptions, and the potential penalties for noncompliance.

Audit and Assurance | Tax

Beneficial Ownership Information (“BOI”) reporting is a new federal law requirement estimated to impact more than 30 million businesses as soon as January 1, 2024. In general, any entity, domestic or foreign, created by filing a document with a secretary of state (or equivalent state office) will be required to file a BOI report. Unlike a lot of government requirements, BOI reporting targets small businesses.

If you are a small business owner, there is a likelihood that your business is subject to BOI reporting. BOI reports will not be filed with the IRS, but with the Financial Crimes Enforcement Network (FinCEN), another agency of the Department of Treasury. Penalties for willful noncompliance may result in criminal and civil penalties of $500 per day and up to $10,000 with up to two years of jail time. That’s why we care.

Entities subject to BOI reporting requirements, called “reporting companies,” must file reports identifying (1) the beneficial owners of the entity, and, in some instances, (2) the individuals who have applied with specified governmental authorities to form the entity or register it to do business (“company applicants”).

Additional information about BOI reporting is provided in the following questions and answers.

Is BOI reporting a new requirement?

Yes. BOI reporting is a new requirement created by the Corporate Transparency Act (“CTA”), which became law in 2021. BOI reporting aims to provide the government with resources to crack down on anonymous shell companies used by money launderers and criminals. However, the CTA is far-reaching, and most legitimate, small businesses will be subject to BOI reporting.

Who is a beneficial owner?

A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests. For more information on beneficial owners, including the meaning of “substantial control” and “ownership interest,” we recommend reviewing the Frequently Asked Questions (“FAQs”) posted by FinCEN, which are available at https://www.fincen.gov/boi-faqs.

Who is a company applicant?

As an initial matter, only reporting companies created or registered on or after January 1, 2024, will need to report their company applicants. Up to two individuals could qualify as a company applicant: (1) the individual who directly files the document that creates or registers the company, and (2) if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing. In many cases, company applicants will be a lawyer, a law firm, or an entity formation company.

What type of information must be reported?

A reporting company will be required to report the following information about its beneficial owners and company applicants: the individual’s name, date of birth, address, and an identifying number from an acceptable identification document, such as a passport or U.S. driver’s license, as well as the name of the issuing state or jurisdiction. A copy of the identification document must also be provided.

Generally, BOI reports also must include the reporting company’s legal name, any trade names, the current street address of its principal place of business, its jurisdiction of formation or registration, and its tax identification number.

When do I have to report this information?

The deadlines for filing BOI reports depend on when the reporting company was created. The following chart illustrates the filing deadlines. Note that organizations formed in 2024 have only ninety (90) days to file their BOI report.

Creation or Registration Date of Company Filing Deadline
On or after January 1, 2024, but before January 1, 2025 Within 90 days of creation or registration
Before January 1, 2024 Before January 1, 2025
On or after January 1, 2025 Within 30 days of creation or registration

What if there is a change in the information reported?

If there is any change to the information reported about the company or its beneficial owners, an updated report must be filed no later than 30 days after the date of the change. Likewise, if a BOI report is inaccurate, the company must correct it no later than 30 days after it becomes aware of the inaccuracy or has reason to know about it.

Is there an annual requirement to file a BOI report?

No. There is no annual reporting requirement. Reporting companies must file an initial BOI report and corrected or updated BOI reports as needed.

How will I file my BOI report?

BOI reports will be filed electronically through a secure filing system on FinCEN’s website. This system is currently being developed and is scheduled to be operational on January 1, 2024.

Does every company have to file, or are there exemptions?

There are 23 types of entities that are exempt from BOI reporting. Exempt entities include publicly traded companies meeting certain requirements, many nonprofits, and entities that qualify as a “large operating company.” Generally, a large operating company is an entity that employs more than 20 full-time employees in the U.S., has an operating presence at a physical office in the U.S., and filed a federal income tax or information return in the U.S. for the previous year showing more than $5,000,000 in gross receipts or sales. More information on exemptions is available in FinCEN’s FAQs.

Who will have access to the BOI reports filed with FinCEN?

Federal, state, local, and Tribe officials and certain foreign officials who submit a request through a U.S. government agency will be permitted to obtain BOI for authorized national security, intelligence, and law enforcement activities. Financial institutions may also access BOI in certain circumstances, with the consent of the reporting company. BOI reported to FinCEN will be stored in a secure, non-public database.

Where can I get more information?

In addition to its FAQs, FinCEN has issued a “Small Entity Compliance Guide.” The compliance guide and other resources and reference materials are available on FinCEN’s website at https://www.fincen.gov/boi. Also, FinCEN has stated it will continue to provide guidance, information, and updates related to the BOI reporting requirements. Subscribe here to receive updates via email from FinCEN.

You have sole responsibility for your compliance with the CTA, including its BOI reporting requirements and the collection of relevant ownership and other information. Information regarding the BOI reporting requirements can be found at https://www.fincen.gov/boi. Consider consulting with legal counsel if you have questions regarding the applicability of the CTA’s reporting requirements or the collection of relevant information.

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