The calendar has turned to 2024, meaning many small businesses, private companies, and other entities are now required to file their beneficial ownership information (BOI) with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
The Corporate Transparency Act (CTA), enacted by Congress in 2021, requires reporting companies—both foreign and domestic—that file incorporation paperwork with secretaries of state or tribal authorities to also file BOI with FinCEN. The agency estimated more than 32 million reporting companies will be required to report their BOI to the registry in 2024.
The registry is designed to assist FinCEN and law enforcement in understanding who owns corporations and shell companies to help locate and capture parties responsible for money laundering, financing terrorist groups, and other financial crime.
If you are already familiar with BOI reporting requirements and want to file, here is the link to FinCEN’s e-filing system.
Many reporting companies are still unsure whether their organization is required to file or are completely unaware of the new requirements. If you have questions about which entities are required to file, which are exempt, and what information must be reported, here are some answers.
What is BOI? What is a beneficial owner?
BOI is “identifying information about the individuals who directly or indirectly own or control a company,” as defined by FinCEN. A beneficial owner is “an individual who either directly or indirectly: (1) exercises substantial control over the reporting company or (2) owns or controls at least 25 percent of the reporting company’s ownership interests.”
When must my company file its BOI?
New reporting companies—formed on or after Jan. 1, 2024—have 90 days from the date they receive notice of the company’s creation to file their initial BOI report with FinCEN. Reporting companies created or registered to do business before Jan. 1, 2024, will have until Jan. 1, 2025, to file their initial BOI report.
Who is exempt?
Generally, government entities and regulated entities that already report their BOI to government entities are exempt.
FinCEN has published a list of 23 exempted entities, which includes public companies, banks, credit unions, broker-dealers, securities exchanges, investment advisers, venture capital fund advisers, insurance companies, Commodity Exchange Act registered entities, accounting firms, public utilities, tax-exempt entities, large operating companies, inactive entities, and more.
Large operating companies are defined by FinCEN as having 20 or more full-time U.S.-based employees, having physical operations in the United States, and having generated more than $5 million in gross receipts or sales on their most recent federal income tax return.
What information must a reporting company submit about itself?
A reporting company must report its legal name; any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names; the street address of its principal place of business in the United States; its jurisdiction of formation or registration; and its taxpayer identification number.
What information must a reporting company provide about its beneficial owners?
For each individual who is a beneficial owner, a reporting company must provide the individual’s name; date of birth; residential address; and an identifying number from an acceptable identification document, such as a passport or U.S. driver’s license.
Who will have access to FinCEN’s BOI registry?
According to FinCEN’s recently finalized BOI registry access rule, entities granted access to the registry include federal law enforcement agencies using “appropriate protocols”; federal agencies fulfilling requests of certain “foreign requesters,” like foreign law enforcement agencies; the U.S. Treasury and its agents; state, local, and tribal law enforcement agencies with a court order; and financial institutions in the process of complying with FinCEN’s 2016 customer due diligence rule.
What are the penalties for not reporting BOI to FinCEN?
Penalties include civil penalties of up to $500 for each day the violation continues, as well as criminal penalties of up to two years imprisonment and a fine of up to $10,000, according to the CTA.
Potential violations include “willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information,” said FinCEN.