The Financial Crimes Enforcement Network (FinCEN) began accepting Beneficial Ownership Information (BOI) Reports on January 1, 2024, which can be electronically filed through FinCEN’s BOI E-filing system. Certain companies, referred to as “Reporting Companies,” are required to disclose information to FinCEN about the company itself, its Beneficial Owners, and, for newly formed companies, its Company Applicants. These reporting requirements were implemented with the passage of the Corporate Transparency Act (CTA), which aims to prevent illicit activities such as money laundering or terrorist financing facilitated by opaque structures that conceal the identities of individual owners. BOI Reporting is not a one-time filing but an ongoing reporting requirement. When previously reported information changes, Reporting Companies must also report such changes to FinCEN on updated Reports. This article discusses who must file a BOI Report and when filing an updated Report is necessary.
Not all companies are required to report BOI to FinCEN. Companies must only report if they meet the Reporting Company definition and do not qualify for an exemption. There are two categories of Reporting Companies: domestic and foreign Reporting Companies. Domestic Reporting Companies are companies formed under U.S. laws, such as corporations, limited liability companies, or other companies created in the U.S. by filing a document with a secretary of state or similar office. Foreign Reporting Companies are companies formed in jurisdictions outside of the U.S. that have registered to do business in the U.S. or filed a document with a secretary of state or similar office.
There are 23 exemptions that could absolve a company from the obligation to file a BOI Report. Common exemptions include companies in highly regulated environments, like banks, insurance companies, or public accounting firms, certain investment companies registered with the SEC, tax-exempt entities, inactive entities, or subsidiaries of exempt entities. Large operating companies with more than 20 full-time employees in the U.S., more than $5M in gross receipts or sales in the U.S., and a physical presence (i.e., an office) in the U.S. are also exempt from BOI Reporting.
The deadlines for Reporting Companies to file their initial BOI Reports are listed below:
Reporting Companies are required to report their full legal name, trade name or “doing business as” (DBA) name, current U.S. address, State, Tribal, or foreign jurisdiction of formation, and Internal Revenue Service (IRS) Taxpayer Identification Number (TIN), such as an Employer Identification Number (EIN) or a foreign tax identification number and the name of such jurisdiction.
Reporting Companies are required to report certain information about each of their Beneficial Owners. Beneficial Owners are defined as individuals who own, directly or indirectly, 25% or more of the ownership interests of a Reporting Company or exercise substantial control over the company. An individual may be a Beneficial Owner through substantial control, ownership interests, or both. Companies can have multiple Beneficial Owners, such as multiple individuals who own or control 25% of the company and senior officers or important decision-makers of the company. There is no limit to the number of Beneficial Owners a company may have.
Companies formed on or after January 1, 2024, must also report information about their Company Applicants. Company Applicants are individuals who either directly file the formation or registration document with a secretary of state or similar office or are primarily responsible for overseeing the relevant document. Common examples of Company Applicants include attorneys, registered agents, or company formation professionals. These individuals typically file a formation document or registration with a secretary of state or similar office to create a company.
Each Beneficial Owner and Company Applicant is required to report their full legal name, date of birth, current address, a unique identification number, and an image of the identification document, such as a valid driver’s license or passport. Beneficial Owners must disclose their current residential street address, while Company Applicants are required to report their business street address.
Once a company has filed its initial BOI Report, the company also has an ongoing requirement to report changes in information. For example, if the Reporting Company legally changes its name or registers a new DBA name, an updated Report must be filed within 30 days of the change. The same applies if a Reporting Company becomes exempt after filing its initial BOI Report. An updated Report must be filed within 30 days to indicate the company’s newly exempt status from the reporting requirements. Reporting Companies are not obligated to report their termination or dissolution to FinCEN.
Similarly, changes to the Beneficial Owners’ information, such as the appointment of a new CEO or a sale that alters the Beneficial Owners’ ownership interest threshold of 25%, must also be reported within 30 days of such change. Changes to Beneficial Owners’ personal information, such as name or address changes, also necessitate filing an updated Report. Please note that the renewal of a Beneficial Owner’s identification document does not trigger a filing requirement unless a new unique identifying number is issued. A Reporting Company is not required to file an updated Report if the Company Applicant’s information changes.
If a Reporting Company identifies any inaccuracies in a previously filed BOI Report, it is required to correct them within 30 days from the date the company became aware of the inaccuracy or had reason to know of it. An inaccuracy in a BOI Report differs from a change of information in that inaccuracies of reported information about the Reporting Company, its Beneficial Owners, and its Company Applicants must be corrected within 30 days. Updated Reports must be filed through FinCEN’s BOI E-filing system, whether they pertain to changes in information or inaccuracies on a previously filed BOI Report.
Reporting Companies must ensure they communicate with their Beneficial Owners to ensure that updated Reports are filed in a timely manner. Further, Reporting Companies must work with their Beneficial Owners and Company Applicants to verify that the information reported to FinCEN is complete, accurate, and correct.
Reporting Companies that fail to report Beneficial Ownership information may be subject to civil penalties, accruing up to $591 per day, capping at $10,0000. Criminal penalties of imprisonment for up to two years may also be enforced for failing to comply with BOI Reporting requirements. The Reporting Company and its senior officers may be held liable for these penalties. Further, a Beneficial Owner may also be subject to civil and/or criminal penalties for knowingly causing a company not to file a BOI Report or providing incomplete or false information to FinCEN. For example, if an individual who qualifies as a Beneficial Owner refuses to provide their identifying documents or other required information for a Reporting Company to file a complete and accurate BOI Report, the Beneficial Owner may be subject to penalties by FinCEN.
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