Effective January 1, 2024, a new reporting requirement goes into effect that will require millions of small businesses to file a Beneficial Ownership Information (BOI) Report with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
Congress imposed this requirement in a statute called the Corporate Transparency Act (CTA), with FinCEN issuing the regulation providing the details on who must file a report, when it has to be filed, and what information has to be reported. Every small business owner needs to know about this new reporting requirement as non-compliance can result in severe penalties.
Who Must Report?
The CTA requires so called “reporting companies” to file reports with FinCEN identifying the company’s beneficial owners and certain other information. A reporting company is defined to include most entities formed under state law, like LLCs, LLPs, corporations, and others.
Beneficial ownership generally means any of the following: people with substantial control; people with ownership interests, whether indirect or direct, equal to at least 25% of the company’s equity interests; and company applicants.
There are numerous exemptions from the definition of “reporting company.” Below is a list of some of the more notable exemptions:
- Banks, bank holding companies, credit unions, governmental entities, publicly traded companies, insurance companies, public accounting firms, tax-exempt entities.
- So called “Large operating companies” that have 1) a physical office in US, 2) more than 20 U.S. based FT employees, and 3) more than $5M of gross receipts reported on prior federal tax return.
Under current proposed regulations, existing reporting companies have between January 1, 2024, and January 1, 2025 to file with FinCEN, while reporting companies formed on or after January 1, 2024 and before January 1, 2025 must file within 90 days of formation. Entities formed after January 1, 2025, must file within 30 days of formation. Newly formed companies must coordinate with their legal and tax advisors to ensure the proper reporting is completed within the required timeline.
What’s in the Report?
Reports include information about (1) the reporting company, (2) the reporting company’s beneficial owners, and (3) “company applicants” who made the filings to create the entity.
- Information about the reporting company includes:
- Full legal name
- Any trade name or “doing business as” (d/b/a) name
- Current address
- Jurisdiction of formation
- Federal taxpayer ID number
Information about individual beneficial owners and company applicants includes:
- Full legal name
- Date of birth
- Current address
- Unique identifying number and issuing jurisdiction (e.g., U.S. passport or driver license)
- Image of document with identifying number
How are BOI Reports Filed?
The initial Beneficial Ownership Information (BOI) report and all updates and corrections will be filed electronically with FinCEN through a system that will be available via FinCEN’s website. There is no fee for filing the reports.
Updated Reports
Updated reports are due within 30 calendar days after a change occurs.
Possible Penalties
Failure to comply with the CTA can result in a $500-per-day penalty (up to $10,000) and possible criminal penalties.
Fees
There is no fee for submitting your BOI report to FinCEN.
Where can I find more information about BOI reporting?
Access FinCEN’s website for information about BOI reporting.
