According to the Federal Government, in the realm of financial regulation and anti-money laundering efforts, transparency is key. Forget that the Pentagon has never passed an audit since their first established audit in 2017. In 2021, Congress enacted the bipartisan Corporate Transparency Act to curb illicit finance. This law requires many companies doing business in the United States to report information about who ultimately owns or controls them. The law “creates a new beneficial ownership information reporting requirement as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.” In line with this objective, the Financial Crimes Enforcement Network (FinCEN), a bureau of the United States Department of the Treasury, has implemented regulations mandating beneficial ownership information reporting.
What is Beneficial Ownership Information Reporting?
Beneficial ownership information (BOI) reporting refers to the requirement for certain entities to disclose information about their beneficial owners to FinCEN. This information includes details about individuals who directly or indirectly own or control a substantial interest in the entity, enabling authorities to trace the flow of funds and identify potential risks associated with hidden ownership structures.
Exemptions and Entities Covered
The majority of American small business owners with an LLC or S-Corporation will be required to file the BOI. In true government fashion, there is a 57-page Small Entity Compliance Guide that explains everything. While beneficial ownership reporting is mandatory for many entities, it's important to note that there are exceptions. According to FinCEN regulations, 23 types of entities are exempt from the beneficial ownership information reporting requirements. Provided below is the exemption chart from the Compliance Guide.
In order to meet the exemption as a large operating entity, the entity must employ more than 20 full time employees in the United States, the entity must have a physical address in the United States and the entity filed a federal tax return for the prior year with more than $5,000,000 in gross receipts or sales.
Reporting Deadlines and Penalties
Entities subject to beneficial ownership reporting requirements must submit the necessary information to FinCEN within specified timeframes. If your company already existed as of January 1, 2024, it must file its initial BOI report by January 1, 2025. If your company is created or registered to do business in the United States on or after January 1, 2024, and before January 1, 2025, it will have 90 calendar days after receiving actual or public notice that the company’s creation or registration is effective to file its initial BOI report.
Again, in true government fashion, non-compliance with beneficial ownership reporting requirements can result in significant penalties. Failure to report on time or providing false or misleading information can lead to civil penalties of up to $500 per day of non-compliance, criminal penalties including fines of up to $10,000 and imprisonment for up to two years, or both.
What Gets Reported?
Beneficial ownership information reporting requires entities to disclose specific details about individuals who ultimately own or control a substantial interest in the entity. The reported information typically includes:
For the reporting company:
» Full legal name
» Any trade name or “doing business as” name
» Complete current U.S. address; » Jurisdiction of formation (including State1 or Tribal jurisdiction for a domestic reporting company)
» For a foreign reporting company only, State or Tribal jurisdiction of first registration; and
» IRS Taxpayer Identification Number (TIN), including an Employer Identification Number (EIN) (or, if a foreign reporting company has not been issued a TIN, the reporting company’s foreign tax identification number and the name of the issuing jurisdiction)
For each beneficial owner and each company applicant required to be reported:
» Full legal name
» Date of birth
» Complete current address
» Unique identifying number and issuing jurisdiction from one of the following non[1]expired documents: (1) U.S. passport; (2) identification document issued by a State, local government, or Indian Tribe issued for the purpose of identifying the individual; (3) State-issued driver’s license; or (4) if none of (1)–(3) are available, a foreign passport; and
» An image of the document from which the unique identifying number was obtained
Conclusion
Be alert, FinCEN has learned of fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements. There is NO fee to file. Be mindful of any correspondence you may receive regarding this reporting, Do not click any links or QR codes in emails, they are fraudulent links. A FinCEN ID is not required for reporting. Understand your due date and make a note on your calendar to report before your deadline.
To file the report, use this link: Beneficial Ownership Information Reporting | FinCEN.gov or copy and paste this web address in your browser https://www.fincen.gov/boi
Don’t shoot the messenger!
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