Beneficial Ownership Information (BOI) Reporting
Effective January 1, 2024, there are new reporting requirements for entities to file a Beneficial Ownership Information (BOI) report with the Department of Treasury’s, Financial Crimes Enforcement Network (FinCEN). These new reporting requirements are extremely broad and unfortunately this is another compliance requirement that will apply to a vast majority of our clients:
If you are a sole proprietor, partnership, single or multi-member LLC, Limited Partnership, or a Corporation, you may be required to provide detailed reporting on the company’s owners and officers/directors.
If you are an owner, investor, officer or board member of a company you may be asked for information by that company in order for them to comply with these new reporting requirements.
At this time, Altair Group, PLLC cannot provide technical or interpretive advice regarding compliance with this filing as we have been advised that it could be construed as the unauthorized practice of law. Please be aware that you have sole responsibility for your compliance with the Corporate Transparency Act (CTA), including its BOI reporting requirements and the collection of relevant ownership information.
The following information being provided is of a general nature. If you have any questions about these new reporting rules and how they affect your business, we would be happy to discuss them with you and provide you with recommendations for legal counsel assistance.
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Resources
FinCEN’s BOI Homepage - https://www.fincen.gov/boi
FinCEN’s BOI Resources - https://www.fincen.gov/boi/small-business-resources
Small Entity Compliance Guide - https://www.fincen.gov/boi/small-entity-compliance-guide
Frequently Asked Questions - https://www.fincen.gov/boi-faqs
Why?
The Corporate Transparency Act (signed into law on January 1, 2021) expanded anti-money laundering laws and created new reporting requirements for certain companies doing business in the U.S.
Beginning in 2024, many small businesses are required to report information about their beneficial owners to FinCEN in an effort to create a national database for use by national security and law enforcement agencies to prevent the use of shell companies for criminal activity.
Who Must File?
Both domestic and foreign reporting companies are required to file reports, subject to certain exemptions. A company is considered a reporting company if a document was filed with a state’s Secretary of State (SOS) or similar office to create or register the entity.
Corporations (C or S corporations), LLCs, and other entities formed through a SOS or similar office are subject to the reporting requirements. Foreign companies are required to file reports if they are registered with the SOS or similar office under state law.
Who Doesn’t File?
There are 23 types of entities that are exempt from the reporting requirements. A full list can be found on the FinCEN website. Most of the exemptions are for financial institutions or organizations that already have other reporting requirements that provide similar information.
There is a “Large operating company” exemption which is defined as a company that:
Employs more than 20 full time employees in the U.S.
Gross Revenue over $5 million from U.S. sources
Physical office in the U.S.
Sole proprietorships, trusts, and general partnerships that do not require the filing of a formal document with a SOS or similar office are not required to file.
What Information Must be Provided?
BOI must be reported for the reporting company's:
Beneficial Owners
Company Applicants (for entities formed or registered after 2023)
BOI includes an individual's full legal name, date of birth, street address and a unique ID number. The unique ID number can be from a non-expired US passport, state driver's license, or other government-issued ID card. If the individual does not have any of those documents, then a non-expired foreign passport can be used. An image of the document showing the unique ID number must also be included with the report.
Who are Beneficial Owners?
Two groups of individuals are considered beneficial owners of a reporting company:
Any individual who directly or indirectly owns or controls at least 25% of the ownership interests of the reporting company
Any individual who exercises substantial control over the reporting company.
Individuals with substantial control are those with substantial influence over important decisions about a reporting company's business, finances, and structure. LLC managers, general partners, board members and senior officers (president, CFO, general counsel, CEO, COO, and any other officer who performs a similar function) typically have substantial control, as are individuals with the authority to appoint or remove senior officers. There is no requirement that these individuals have actual ownership in the company to be considered a beneficial owner for reporting purposes.
Who are Company Applicants?
For companies formed after January 1, 2024, “Company Applicants” must also be reported. Company applicants provide the same information that is required of beneficial owners. There are two categories of company applicants:
The person who actually files the document that creates or registers the reporting company. This could have been the company founder, attorney or a person at your attorney’s office.
The person that is primarily responsible for directing or controlling the filing of the creation or first registration document.
FinCEN ID
Individuals and reporting companies can request a FinCEN Identifier (FinCEN ID) to use in place of supplying detailed information on the report. A FinCEN ID is a unique number assigned by FinCEN which is obtained by submitting the same information as is required of a beneficial owner or reporting company.
A FinCEN ID may be useful to individuals that prefer to send their personal information directly to FinCEN rather than through a reporting company, or to individuals that may be required to supply information as a beneficial owner or company applicant of several reporting companies.
Important Filing Dates
For existing reporting companies created or registered before 2024, the initial report is due by January 1, 2025.
For reporting companies created or registered in 2024, the initial report is due 90 days after the entity's creation or registration.
For reporting companies created or registered on or after January 1, 2025, the initial report is due 30 days after the entity's creation or registration.
What About Report Changes?
If there is a change to previously reported information about the reporting company or its beneficial owners, an updated report must be filed within 30 days of the change. Examples of changes include:
Address or name changes
Adding or removing > 25% owners
Adding or removing officers or board members
What if I Don’t File?
The penalties for willfully failing to file both initial and updated reports are steep - $500 per day that the report is late, up to $10,000 and imprisonment for up to two years.
How to File?
BOI reports must be filed electronically and there is no fee for filing the report. FinCEN's e-filing portal, available at https://boiefiling.fincen.gov, provides two methods to submit a report:
Filling out a web based version of the form and submitting it online,
Uploading a completed PDF version of the BOI report.
Who Can Access the Information?
Beneficial ownership information reported to FinCEN will be stored in a secure, non-public database using rigorous information security methods and controls typically used in the Federal government to protect non-classified yet sensitive information systems at the highest security level.
FinCEN will permit Federal, State, local, and Tribal officials, as well as certain foreign officials who submit a request through a U.S. Federal government agency, to obtain beneficial ownership information for authorized activities related to national security, intelligence, and law enforcement. Financial institutions will have access to beneficial ownership information in certain circumstances, with the consent of the reporting company.
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Frequently Asked Questions:
What if a Trust is an Owner in a Reporting Company?
One or more of the following individuals may be treated as indirect beneficial owners of a trust:
Trustee, Trust Protector, Beneficiary, Grantor or an individual given certain trust powers.
What if I Live in a Community Property State such as California?
As of the date of this writing, it does not appear that FinCEN has specifically addressed how the reporting rule covers community property. It may be safest to include community property ownership when determining a company’s beneficial owners until further guidance is issued.
Who is a 25% Indirect Owner?
A 25% indirect owner is an individual that owns at least 25% of a reporting company after taking into account their direct ownership (if any) plus any ownership of the reporting company through another company.
Last update: February 28, 2024