New Beneficial Ownership Information Reporting Requirements

Beneficial Ownership Information Reporting

Introduction

The Corporate Transparency Act (CTA), enacted as part of the National Defense Authorization Act for Fiscal Year 2021, introduces a new beneficial ownership information reporting requirement for certain entities to report information about their beneficial owners. The BOI report is designed to provide transparency about who owns and benefits from an LLC or Corporation 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 a Beneficial Ownership Report (BOI)?

  • Corporations, limited liability companies (LLCs), and other similar entities created by filing a document with a secretary of state or similar office.
  • Foreign entities that register to do business in the United States.

Exemptions:

Certain entities are exempt from this reporting requirement, including:

  • Sole Proprietorships that have not filed as a single-member LLC with the Secretary of State
  • General partnerships or trusts that have not been filed with the secretary of state
  • Publicly traded companies
  • Entities regulated by specific federal or state agencies (e.g. banks, credit unions, government agencies, etc.)
  • Entities that employ more than 20 full-time employees in the United States, have filed federal income tax returns demonstrating more than $5 million in gross receipts or sales, and have an operating presence at a physical office within the U.S.

Who is a Beneficial Owner?

A beneficial owner is typically defined as an individual who:

  • Owns, directly or indirectly, 25% or more of the equity interests of the entity.
  • Exercises substantial control over the entity.

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 after 2024, the initial report is due 30 days after the entity’s creation or registration.

Required Information:

Entities must provide:

  • Full legal name, date of birth, address, and unique identifying number (from a passport, driver’s license, etc.) for each beneficial owner.
  • Details of the entity’s ownership structure, including personal details of significant individuals in the company.

How to File:

BOI reports must be filed electronically. FinCEN’s e-filing portal, available at https://boiefiling.fincen.gov, provides two methods to submit a report: (1) by filling out a web-based version of the form and submitting it online, or (2) by uploading a completed PDF version of the BOI report. Some third-party service providers may also offer the ability to file the BOI report through their software. The person who submits the BOI report will need to provide their name and email address to FinCEN. There is no fee for filing the report.

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. So, your company must implement a system to identify reportable changes and file an updated report with FinCEN in a timely manner.

If you do not want to file on your own, you can visit CorpNet which offers a service for BOI reporting.

Penalties for Not Filing:

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.

Implications for Businesses

Non-compliance with the reporting requirements can result in significant penalties. Businesses need to understand their reporting obligations and establish adequate procedures to collect and report the necessary information.

Resources for More Information

For further details and updates on the Beneficial Owners Information Reporting Requirements, consider visiting the following reliable sources:

U.S. Department of the Treasury – FinCEN

FAQs published by FINCEN

BOI Filings Services Through CorpNet

The information provided in this blog post is intended for general guidance and is not a substitute for professional legal or financial advice. Always consult with a professional advisor for specific advice related to your situation.

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