BUSINESS ARTICLES
Own or Control a Business? You May Need to File a BOI by Jan 1.
Beginning on January 1, 2024, many companies in the United States are required to report information about their beneficial owners (i.e., the individuals who ultimately own or control the company). Companies must report the information to the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the Treasury Department, through an electronic filing system. The beneficial ownership information (BOI) reporting requirements are part of the Corporate Transparency Act.
Reporting entities. Generally, any corporation, limited liability company, or any other entity that is created by filing a document with a secretary of state or similar office under state or tribal laws, or is formed under foreign law and registered to do business in the United States by filing a document with a secretary of state or similar office under state or tribal laws, is a reporting company that must disclose information regarding its beneficial owners and its company applicants to FinCEN under the Corporate Transparency Act.
However, there are exclusions for heavily regulated entities that already report such information to other federal agencies, or companies with real business activities that are not perceived to be a high risk for money laundering. Additionally, the reporting requirements do not apply to an inactive entity.
Two notable exceptions to the reporting requirements:
- “Large operating company” exemption. To qualify, an entity must have more than 20 full-time employees in the United States, must have filed a federal income tax or information return in the United States in the previous year demonstrating more than $5,000,000 in gross receipts or sales, and must have an operating presence at a physical office in the United States.
- Tax-exempt entities
Beneficial owner. A beneficial owner is an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, either:
- exercises substantial control over the reporting company; or
- owns or controls at least 25 percent of the ownership interests of the reporting company.
However, beneficial owners do not include minor children; nominees, intermediaries, custodians, or agents; employees; inheritors; or creditors.
Company applicant. A company applicant is the individual who files the document with a secretary of state or any similar office under state or Indian tribe law that:
- creates the domestic reporting company, or
- registers the foreign reporting company to do business in the United States.
Further, the individual who is primarily responsible for directing or controlling that filing by another individual is also a company applicant.
Information to be reported. A reporting company must disclose the identity of each beneficial owner of the company and each company applicant. For each individual who is a beneficial owner or a company applicant, the reported information must include:
- full legal name;
- date of birth;
- residential street address; and
- an identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of identification document.
The reporting company must also provide an image of the identification document used to obtain the identifying number in item four.
Filing deadlines for initial reports. Domestic reporting companies created or registered to do business in the United States and foreign reporting companies registered to do business in the United States before January 1, 2024, must file their initial report with FinCEN no later than January 1, 2025. Newly created or registered companies created or registered to do business in the United States in 2024 have 90 calendar days to file after receiving actual or public notice that their company’s creation or registration is effective.
If your company was created or registered on or after January 1, 2025, it must file its initial beneficial ownership information report within 30 calendar days after receiving actual or public notice that its creation or registration is effective.
If there is any change to the required information about your company or its beneficial owners in a beneficial ownership information report that your company filed, your company must file an updated report no later than 30 days after the date of the change.
Penalties for noncompliance. A person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. However, this civil penalty amount is adjusted annually for inflation. A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. 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.
Additional Resources
FINCEN Small Entity Compliance Guide
Dugan + Lopatka will not be assisting or filing these reports. The above is for informational and educational purposes only. Please consider consulting with legal counsel if you have any questions regarding the applicability of the Corporate Transparency Act’s reporting requirements and issues surrounding the collection of relevant ownership information.