Beneficial Ownership Information (BOI) Reporting
New reporting requirements are on the horizon. How do you know if you need to file a Beneficial Ownership Information (BOI) report?
According to FinCEN.com, there are two categories of companies that need to report:
Domestic reporting companies which include corporations, limited liability companies (LLCs), and any other entities created by the filing of a document with the secretary of state or any similar office in the United States. Certain statutory trusts, business trusts, and foundations are included in this.
Foreign reporting companies which include entities formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with the secretary of state or any similar office.
Some entities are exempt from the reporting requirements. These include governmental authorities, banks and credit unions, insurance companies, accounting firms, and 19 more types of entities. The full list can be found at https://www.fincen.gov/boi-faqs#B_7.
HOW DO WE FILE?
The Treasury’s Financial Crimes Enforcement Network (FinCEN) is setting up a site for companies to register their Beneficial Ownership Information (BOI). BOI reporting requirements will be effective January 1, 2024. Existing companies, being those created before January 1, 2024, will have one year to file their BOI reports.
Companies created after January 1, 2024 will have 30 days from the date the company receives actual notice that its registration has become effective to file their BOI reports. There is discussion of extending that deadline to either 90 days or one year.
CHANGES TO INFORMATION ON FILE WITH FinCEN
Any changes to the information on file with FinCEN will need to be updated within 30 days. That includes changes to the business as well as changes for the beneficial owners. Whether a change to an address, a driver’s license, etc., if it changes originally filed information, you will need to updated the information in the FinCEN system. Keep a copy of your original information so you can see when changes are necessary.
WHY AND WHAT?
The BOI reporting requirement is an anti-money laundering measure enacted through the Corporate Transparency Act. It applies to most companies. It requires businesses to identify beneficial owners and company applicants and to provide information about both the company and its owners, including full legal name, any DBA names, address, state or tribal jurisdiction or formation, IRS taxpayer identification number, birthdate and other details.
WHO IS A BENEFICIAL OWNER?
A beneficial owner is an individual who either exercises substantial control over the reporting company, or owns or controls at least 25% of the reporting company’s ownership interests.
This might be:
- A senior officer such as the company’s president, chief financial officer, chief executive officer, general counsel, or any other officer who performs a similar function.
- An individual who has the authority to appoint or remove certain officers or a majority of directors of the reporting company.
- An important decision maker for the reporting company, or has any other form of substantial control over the reporting company.
- And of course, anyone with ownership interest in a company.
You can find specific details at https://www.fincen.gov/boi-faqs#B_7, D. Beneficial Owner.
WHAT IF I CHOOSE NOT TO FILE A REPORT
If authorities determine that a business is willfully not complying with the BOI reporting, civil and criminal penalties may apply, and they are impactful. Civil penalties are assessed at $500 per day, up to a total of $10,000, for as long as the violation continues. Criminal penalties could include up to two years of prison time.
In short, you will want to file your initial report, keep a copy of the information and add “FinCEN Updates” to your regular To-Do List!