Beneficial ownership information (“BOI”) reporting is a new rule issued by FINCEN requiring business owners to provide information about the individuals who own / control certain business entities. Below is a basic summary of the BOI rules.

 

More information can be found on the FinCEN website.

 

Who: 

Domestic reporting companies – corps, LLCs, and entities

 

What:

“Beneficial ownership” means a person who:

(a)  Directly or indirectly exercises “substantial control” over a company, or

(b)  Directly or indirectly owns or controls 25% or more of a company’s ownership interests.

A person can be a “beneficial owner” if they exercise significant influence over the activities and decisions of an entity, even if they don’t own a substantial portion of the company or have a formal title, such as CEO.

Beneficial owners could also include family members.

 

Why:

The Corporate Transparency Act of 2020 is finally taking effect. The purpose is to help prevent the creation of anonymous shell companies, which is intended to help prevent money laundering and other financial crimes.

 

When:

The BOI requirements begin on January 1, 2024. Existing companies must file their first report before January 1, 2025. Entities formed after January 1, 2024 must file their first report within 30 days of creation / registration with the state.

 

How:

BOI reporting will be done on FinCEN’s website. Reporting must include:

The business’s legal name and any trade names or “doing business as” (DBA) names

The current street address of its principal place of business in the U.S.

State of formation or registration

Its taxpayer identification number

The name, date of birth, and address of all beneficial owners of the company

A unique identifying number from an acceptable identification document, such as a driver’s license issued by a U.S. state or passport

An image of the identification document.

 

Penalties:

Penalties for not reporting timely include a fine of up to $500 per day, up to a maximum of $10,000.

Willful / intentional failure to file is a felony, punishable by up to 2 years in prison. If other anti-money laundering violations are found, the penalty is up to 10 years in prison. 

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