On January 1, 2024 a new reporting requirement went into effect that requires many small businesses to file a Beneficial Ownership Information (BOI) Report with the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
The requirement was imposed in a statute called the Corporate Transparency Act, enacted in 2021, which aimed to combat illicit activities such as tax fraud, money laundering, and financing for terrorism. It mandated certain US companies, and registered foreign companies, to report information identifying owners and those exercising substantial control of the business to FinCEN. Every small business needs to be aware of this new reporting requirement as non-compliance can result in severe penalties.
Who has to file a BOI report?
Every corporation, LLC, or other entity formed by filing with a Secretary of State is required to file a BOI report unless it qualifies for an exemption. FinCEN provides a list of 23 entity types that are exempt from the new reporting requirements in their Small Entity Compliance Guide (link below). US entities that are not exempt, and therefore required to file a BOI report, are called “domestic reporting companies.” A domestic reporting company must disclose to FinCEN information about the company and its beneficial owners.
When does the initial BOI report need to be filed?
A domestic reporting company created before January 1, 2024 must file its initial BOI report by January 1, 2025.
A domestic reporting company created on or after January 1, 2024 and before January 1, 2025 must file a report within 90 calendar days of the date on which it receives actual or public notice that its creation has become effective.
A domestic reporting company created on or after January 1, 2025 must file a report within 30 calendar days of the date on which it receives actual or public notice that its creation has become effective.
Please also be aware that if there is any change in the information reported about the reporting company or its beneficial owners, the reporting company must file an updated report within 30 calendar days after the date on which the change occurs.
What information needs to be disclosed?
A domestic reporting company has to provide information about the company, its beneficial owners, and its company applicants.
Beneficial owners are those individuals who own, either directly or indirectly, at least 25% of the ownership interests in the company, or individuals who exercise substantial control over the reporting company. Substantial control is determined by applying four general criteria:
- Senior officer
- Authority to appoint or remove officers or the majority of directors
- Important decision-maker over the businesses’ scope, finances, and/or structure
- Exercises any other form of substantial control that may be new or unique
FinCEN requires the following identifying information to be reported for each beneficial owner identified on the BOI.
- Full legal name
- Current, correct address
- Date of birth
- Tax ID and image of a non-expired US passport, State or other government issued ID, or a foreign passport if the individual has no other form of US identification.
FinCEN also requires the same information be reported for company applicants, i.e. individuals who either directly filed the initial registration or formation paperwork with the Secretary of State for the reporting company, or had authority to direct that such filing be made even if they themselves did not file the paperwork.
What if I don’t file my BOI report?
Penalties for non-filing or providing inaccurate information on a BOI can be severe– up to $500 each day of the violation, or criminal penalties up to 2 years in jail and/or a $10,000 fine if the individual is found to have “willfully caused a company not to file a required BOI report, or to report incomplete or false beneficial ownership information”. A safe harbor exists for non-willful violations. No penalties are assessed provided the information is corrected within 90 days of discovery.
Can Taxman Associates file my BOI report?
Taxman Associates does not prepare or submit beneficial ownership information reports to FinCEN, nor provide specific guidance regarding the legal or regulatory aspects of your compliance with the Corporate Transparency Act. If you have any questions regarding your BOI or compliance with the CTA, we strongly encourage you to consult with qualified legal counsel experienced in this area.
How do I file my BOI report?
Beneficial Ownership Information reports are required to be filed electronically through FinCEN. Please visit the links below.