by 
On January 1, 2024, millions of domestic and foreign small businesses will be required to file a Beneficial Ownership Information (BOI) Report with the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). This new reporting requirement, codified at 31 C.F.R. §1010.380, is the result of the Corporate Treasury Act (CTA), in which Congress gave FinCEN the power to regulate the details of the BOI Reports.
Small businesses need to know whether the new BOI Reporting requirements apply to them and what steps to take. Failure to comply with the law may result in serious penalties.
What Is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) is a law that was enacted in 2021. Its main purpose was to bring the United States into alignment with anti-money laundering and counter-terrorist-financing standards.
The CTA targets business owners who use their corporations, LLCs, and other entities to facilitate money laundering to finance tax fraud, terrorism, and other illegal activities. The CTA calls for the collection of ownership information about those entities so that essential data can be tracked.
Who Must File a BOI Report?
Millions of corporations, LLCs, and other business entities must file a BOI unless they qualify for an exemption. Any business entity that was created by filing documents with a Secretary of State or Indian tribe office, may be required to file a BOI Report. Sole proprietorships and other entities that do not require a filing for formation under state law do not have to file a BOI Report.
Entities formed in the United States are called “domestic reporting companies” under the CTA. Entities created in foreign countries but registered to do business in the United States may also be required to submit a BOI Report. They are called “foreign reporting companies.”
When Must BOI Reports Be Filed?
The deadline for filing a BOI Report depends on when the business entity was created.
If the domestic reporting company was created prior to January 1, 2024, then it has until January 1, 2025 to file a BOI Report with FinCEN.
If the organization was created on or after January 1, 2024, then it must file a BOI Report within 30 calendar days of the date it receives notice that its creation became effective.
Any changes to the BOI Report must be filed in an updated report within 30 calendar days after the date on which the change occurs. Similarly, if there were errors in the original BOI Report, they must be corrected within 30 calendar days after the entity becomes aware or should have known about the inaccuracy.
FinCEN will not begin accepting BOI Reports until January 1, 2024.
How Are BOI Reports Filed?
Initial BOI Reports, updates, and corrections will be filed electronically with FinCEN through a system that will become available on the agency’s website. There will be no fee to file a BOI Report.
Which Entities Are Exempt from Filing a BOI Report?
While many entities are required to file BOI reports, there are 23 categories of exemptions. Those exemptions are in place for entities that are already subject to significant state or federal regulations. Business entities that do not have to file BOI Reports with FinCEN include:
- Publicly traded companies that file reports with the SEC
- Other companies that file reports with the SEC
- Banks
- Credit unions
- Money services businesses
- Securities brokers and dealers
- Securities exchanges or clearing agencies
- Securities reporting issuers
- Investment companies or investment advisors
- Venture Capital fund advisors
- Tax-exempt entities
- Entities assisting tax-exempt entities
- Insurance companies
- State-licensed insurance producers
- Pooled investment vehicles
- Public utilities
- Financial market utilities
- Accounting firms
- Government authorities
- Depository institution holding companies
- Commodity Exchange Act registered entities
- Subsidiary of certain exempt entities
- Inactive entities
In addition to these categories, “large operating companies” are exempt from filing BOI Reports. A large operating company is an entity that has more than 20 full time employees in the U.S. and has at least one physical office within the country. The large operating company must also have filed federal income taxes or an information return with the Internal Revenue Service (IRS) for the previous year amounting to more than $5 million in gross receipts or sales.
To find out if your business must file a BOI Report or if you fall under an exempt category, you should consult with a business lawyer prior to the filing deadline. Failure to file a BOI Report on time may be detrimental to your organization.
What Is Included in a BOI Report?
BOI Reports are not overly complex. However, they must be completed properly in order to satisfy FinCEN Requirements.
Domestic reporting companies created prior to January 1, 2024 must provide information about the company and its beneficial owners. Those created after January 1, 2024, must additionally provide information about company applicants.
A BOI Report must include the following information:
- Reporting company’s full legal name
- Trade or “doing business as” (DBA) names
- Complete street address of principal place of business
- Jurisdiction of formation
- Taxpayer identification number (TIN)
Additional information about beneficial owners and applicants must include:
- Full legal name
- Date of birth
- Current residential street address (with some exceptions)
- Identifying number (from a U.S. passport, state or local ID, driver’s license, etc.)
- Image of the document from which the identifying number was obtained
Who Is Considered a “Beneficial Owner” and “Company Applicant”?
A beneficial owner of an entity that must file a BOI Report is an individual who, directly or indirectly, exercises substantial control over the company or owns at least 25% interest in the entity.
A company applicant is an individual who directly files a document that creates a business entity. That individual is primarily responsible for controlling the filing of those important documents addressing formation and compliance of the organization.
Beneficial owners and company applicants can apply to FinCEN for a unique number or identifier if they want to provide their information directly to FinCEN instead of the reporting company. Those individuals then have the same reporting and updating requirements as the business entities is any information changes over time.
Who Will Have Access to BOI Reports?
The information in BOI Reports will be available to a limited group of government agencies and other entities who must request specific information. Those with access include:
- State law enforcement agencies with a court order
- The Treasury Department
- Federal agencies engaged in national security, intelligence, and law enforcement
- Financial institutions with the company’s consent
- Government regulators of financial institutions
- Certain foreign authorities requesting information via a U.S. agency
What Should Small Businesses Do Now to Prepare for BOI Reporting?
The first step small businesses need to take is to determine if they are required to submit a BOI Report. If they fall within an exemption, they do not have to take any additional steps. However, if they will be required to submit a report, they should gather some of the required information and ensure it is current prior to filing of the initial BOI Report.
Small businesses should also track reported information so they know when to update their BOI Report with FinCEN.
Consult with a Small Business Attorney to Be Prepared
Your small business lawyer can help you gather necessary information and prepare a BOI Report for the upcoming reporting year. It’s important that you meet established deadlines. Otherwise, you may be out of compliance with the CTA.
Attorney Susan Burns has worked with countless small businesses with regulatory and compliance issues. Schedule a time to discuss your needs with her today.
