Beneficial Ownership Information Reporting Requirements
As we previously wrote about, one of the most important changes in the Corporate Transparency Act is the requirement businesses file beneficial ownership information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN).
Who must report?
These new reporting requirements apply to corporations, LLCs, “and any other entity created by the filing of a document with a secretary of state or similar office.” There are some exceptions, including – but not limited to – governmental authorities, tax-exempt entities, banks, credit unions, investment companies, insurance companies, and large operating companies which is defined as “employing more than 20 people in the US, reporting gross revenue (or sales) of over $5M on the prior year’s tax return, and physically present in the US.”
What must be reported?
Specific information (name, date of birth, address, ID number and image) about each “beneficial owner” is required. Beneficial owners are those that own or controls at least 25% of the ownership interest (equity, stock, voting rights, profit interests, options, or privileges) or who exercises substantial control over a reporting company (including senior officers, important decision makers, or those with certain controlling authorities).
Importantly, new entities (those created on or after 1/1/24) must also report on “company applicants.” Company applicants are the people involved in the creation and registration of the company, including “direct filers” and “individuals who direct or control filing actions.”
In addition to the demographic and identifying information on beneficial owners (and company applicants, where applicable) entities must also file company information such legal name, doing business as name(s), address, and company identifying numbers.
When are reports due?
These requirements are currently set to become effective on 1/1/24, which is the date that FinCEN will begin accepting the reports. Initial reports for existing companies (those created before 1/1/24) are due by 1/1/25. Initial reports for new companies (those created on or after 1/1/24) are due within 90 calendar days of receiving notice that the company’s registration is effective. It is worth noting that the deadline used to be 30 days, but in late November FinCEN issued a final rule extending that specific deadline to 90 days for the year 2024 only. Thereafter, the deadline for newly formed companies to file their initial reports reverts to 30 days.
Reports are not due annually, but they must be updated if/when there is a change to any previously reported information about the company or its beneficial owners. Updated reports are due within 30 calendar days of the change occurring or after the company becomes aware or has reason to become aware of any inaccuracies.
What happens if you do not file?
There are steep noncompliance penalties for failure to report on beneficial ownership information, including $550/day up to $10,000 max or up to two years of prison time for willfully failing to file.
How do you file?
You will file your entity’s reports through FinCEN’s e-filing system. Although the system is not yet live, FinCEN has indicated that system and report specifics should be released soon. See FinCEN FAQs on the reports and processes here.
We anticipate additional guidance in relation to these new BOI reports. That guidance may change what needs to be reported, when the reports are due, and/or who may help with completing these new reporting requirements.
To see past publications please visit our Knowledge Center.
The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.