Now Open: Beneficial Ownership Information Reporting

Existing corporations should familiarize themselves with a new law that will require beneficial ownership information (BOI) to be reported. FinCen has developed a new IT system, called the Beneficial Ownership Secure System (BOSS), which will be used to collect, store and maintain BOI reports in the future. Effective January 1, 2024, corporations, limited liability companies (LLCs) and other entities formed under state law (domestic reporting companies), or similar entities formed under foreign law and registered to do business in the U.S. (foreign reporting companies), are required to report their BOI to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCen) which is now open for filing. Failure to comply with this reporting requirement by January 1, 2025, for existing companies will result in penalties.

FinCen has extended the reporting deadline for new companies created or registered in 2024. New companies will now have 90 calendar days from the date of receiving actual or public notice of their creation or registration becoming effective to file their initial reports, rather than the original deadline of 30 days. Please note that new companies created after January 1, 2025, will have just 30 days to file their initial reports.

What is the Purpose of Filing BOI?

The BOI reporting provisions are included in the Corporate Transparency Act (CTA), which is part of the Anti-Mo n ey Laundering Act of 2020 (AML Act). This rule was created to strengthen the ability of FinCen and other agencies to protect U.S. national security, along with preventing and combating money laundering, terrorist financing, tax fraud and other illicit activity. Under the CTA, access to BOI will be granted to federal agencies engaged in national security, intelligence or law enforcement activities. The Department of the Treasury will also have access in connection with its official duties, as well as state and local law enforcement agencies in connection with criminal or civil investigations.

What Types of Entities are Required to File BOI?

Reports must be filed by domestic and foreign reporting companies. A domestic reporting company is defined as a corporation, LLC or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe. A foreign reporting company is defined as a corporation, LLC or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office.

Who Is Considered to Be a Beneficial Owner and/or Company Applicant?

The rule requires that reporting companies file reports with FinCen that identify individuals who are beneficial owners and company applicants of the entity. In most cases, the company applicant will also be a beneficial owner of the company. Under the rule, a beneficial owner includes any individual who directly or indirectly exercises substantial control over a reporting company or owns or controls at least 25% of the ownership interests of a reporting company. The company applicant can be defined as an individual who directly files the document that creates the entity, or, in the case of a foreign reporting company, the document that first registers the entity to do business in the U.S., as well as the individual who is primarily responsible for directing or controlling the filing of the relevant document by another.

Nonetheless, the rule exempts five types of individuals from the definition of beneficial owner. The following are not considered beneficial owners of a reporting company:

A minor child, provided that the reporting company reports the required information of the minor child’s parent or legal guardian
An individual acting as a nominee, intermediary, custodian or agent on behalf of another individual
An individual acting solely as an employee of a reporting company in specified circumstances
An individual whose only interest in a reporting company is a future interest through a right inheritance
A creditor of the reporting company

Are There Exemptions from BOI Reporting?

An exemption applies to entities that employ more than 20 full-time employees in the U.S., have an operating presence at a physical office in the U.S. and demonstrate more than $5 million in gross receipts or sales on their federal income tax return. In the future, entities that fall below this exemption threshold will have 30 days to file a report. An updated report is required if a reporting company later becomes eligible for the exemption. Besides this exemption, the proposed regulations include 23 statutory exemptions from the definition of a reporting company. Below are some noteworthy entity types that are exempt from the rule:

Securities and Exchange Commission (SEC) reporting companies
Regulated financial service companies including banks, credit unions, depository institution holding companies, registered securities broker-dealers, registered investment companies and investment advisers, venture capital fund advisors and pooled investment vehicles
Entities registered pursuant to the Commodity Exchange Act
Tax-exempt entities
Subsidiaries of certain exempt entities
Large operating companies
Accounting firms
Inactive businesses

The full list of exemptions from beneficial ownership information reporting can be found in the final rule by the Financial Crime Enforcement Network in the National Archives of the Federal Register.

What Information is Required in the BOI Report?

The report will include information about the reporting company and information about individual beneficial owners and company applicants. The reporting company will need to include its full legal name, any trade name or “doing business as” name, current address, jurisdiction of formation and federal taxpayer ID number. It must also provide FinCen with several types of information for each beneficial owner and company applicant, including full legal name, birthdate, address and an acceptable identification document, along with the image of the document. All reports filed will not be available to the public and are not subject to requests under the Freedom of Information Act.

If a reporting company has reason to believe that a report filed with FinCEN contains inaccurate information and voluntarily submits a report correcting the information within 90 days of the deadline for the original report, then the Corporate Transparency Act creates a safe harbor from penalty.

How Do I File?

As of January 1, 2024, FinCEN is now accepting U.S. BOI through FinCEN’s secured website. Filing is simple, secure and free of charge, with two filing methods being offered. Instructions can be found on FINCen’s website, along with FAQs and the Small Entity Compliance Guide.

How Can I Identify Potentially Fraudulent Correspondence Related to BOI?

FinCEN has recently been notified of fraudulent attempts being made to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act. The fraudulent correspondence may be titled “Important Compliance Notice” and will ask the recipient to click on a URL or scan a QR code. These emails or letters are fraudulent. FinCEN does not send unsolicited requests. If you receive an email correspondence like this, please do not respond, click on any links or scan any QR codes

Who Can I Contact for Professional Assistance with BOI?

Professional assistance related to BOI is considered a legal service requiring the expertise of a qualified attorney. Therefore, Brown Plus recommends that clients contact their legal teams for assistance in determining their individual requirements and/or assistance filing their BOI with FinCEN.