Are You Prepared for the New Beneficial Ownership Information Reporting Requirements?
There has been widespread pushback against the new beneficial ownership information (BOI) reporting requirements – but whether we like it or not, this new rule is here, and the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) is officially accepting BOI reports. The Corporate Transparency Act (CTA), which introduced these new reporting requirements, became law effective Jan. 1, 2021, as part of the National Defense Authorization Act to combat money laundering, terrorism financing and other criminal funding activities from occurring in the United States.
Beginning Jan. 1, 2024, the CTA implements uniform BOI reporting requirements for corporations, limited liability companies and other business entities formally created in or registered to do business in the United States. Under the CTA, the identity and other confidential information about the “beneficial owners” of these entities must be disclosed to FinCEN.
Below are a select few FAQs related to the CTA, including who is required to comply, what information is required and more.
Who is required to comply?
A reporting company is any domestic or foreign corporation, limited liability company or similar entity with fewer than 20 employees and $5 million in annual gross revenue/receipts that was either:
- Created by the filing of a document with the secretary of state or a similar office under the laws of a State or Indian Tribe; or
- Formed under the laws of a foreign country and registered to do business in the United States by the filing of a document with a secretary of state or a similar office under the laws of a State or Indian Tribe.
Some entities, such as banks, credit unions, investment advisors, brokers/dealers, insurance companies and charitable organizations are exempt from the BOI reporting requirements. It is important to note that entities exempt from reporting may still own a reporting company in its structure, and therefore may be a beneficial owner required to file a BOI report for the underlying reporting company. FinCEN has published a Small Entity Compliance Guide intended to help businesses determine if they are required to report its BOI to FinCEN, which includes a full listing of exempt entities.
What company information should be reported?
If a reporting company is created or registered on or after Jan. 1, 2024, it is required to report information about itself, its beneficial owners and company applicants. Reporting companies created or registered before Jan. 1, 2024, will only need to provide information about itself and beneficial owners.
Reporting companies must report the following information to the FinCEN:
- The company’s legal name
- Any trade names
- Current street address of its principal place of business
- Jurisdiction of formation or registration
- Taxpayer identification number
Who is considered a beneficial owner and what information is required?
Beneficial owners are any individuals who own or control at least 25% of the entity, directly or indirectly, or who have substantial control over the entity. Required information to be submitted about each beneficial owner (and applicants, if applicable) includes:
- Full legal name
- Date of birth
- Form of unique identification number, such as a U.S. driver’s license or passport number
- A digital image of the identification document
All information will be placed on a confidential registry maintained by the FinCEN.
When are reports due?
Existing reporting companies (those formed before Jan. 1, 2024) must report the company and its beneficial owner(s) information before Jan. 1, 2025. New reporting companies formed in 2024 must file their initial reports within 90 calendar days from the date of receiving actual or public notice of their creation or registration becoming effective. Reporting companies created or registered on or after Jan. 1, 2025, will have 30 calendar days to file their initial BOI reports with FinCEN.
Note, BOI reporting is not an annual requirement. A report only needs to be submitted once, unless the filer needs to update or correct information, for which 30 days is granted to submit the amended report.
What are the penalties if I fail to comply?
Violations of the CTA, including failure to report BOI or the reporting of false or fraudulent information, may lead to the following penalties:
- Civil penalties can up be to $500 for each day the violation continues. The penalty is indexed for inflation and is currently $590.
- Criminal penalties may include fines of up to $10,000 and/or imprisonment for up to two years.
Doeren Mayhew’s business advisors are here to assist with your BOI filing needs, including helping you understand this new requirement, identifying whether you need to file, assisting with obtaining an EIN needed to file as well as submitting the BOI report on your behalf.