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Unsure about your responsibilities for the new beneficial ownership information report starting January 1, 2024? Let American Contractors Organization guide you.
In September of 2022, the Financial Crimes Enforcement Network (FinCEN) issued a final rule implementing the bipartisan Corporate Transparency Act’s (CTA) beneficial ownership information (BOI) report. The rule will enhance the ability of government agencies to protect national security and financial systems from illicit use and help prevent drug traffickers, fraudsters, and other criminals from laundering or hiding money in the United States.
The new rule describes who must file a BOI report, what information must be reported, and when a report is due. Specifically, the rule requires Corporations and Limited Liability Companies to file reports that identify the beneficial owners of the entity and the company applicants of the entity.
Key BOI dates to be aware of:
The rule identifies domestic and foreign as the two types of reporting companies that must file a report.
FinCEN expects that these definitions will also include Limited Liability Partnerships, Limited Liability Limited Partnerships, Business Trusts, and most limited Partnerships, because such entities are generally created by a filing with a secretary of state or similar office.
A beneficial ownership information (BOI) report provides the Financial Crimes Enforcement Network (FinCEN) with information about registered business entities, their beneficial owners (individuals with substantial control over or 25% or more ownership interest), and their company applicants.
A beneficial ownership information (BOI) report provides the Financial Crimes Enforcement Network (FinCEN) with information about registered business entities, their beneficial owners (individuals with substantial control over or 25% or more ownership interest), and their company applicants.
Most registered business entities meet FinCEN’s definition of a “reporting company.” Reporting companies can be either domestic or foreign.
So, LLCs, C Corporations, S Corporations, and other types of corporations fit the definition. FinCEN doesn’t specifically mention them, but different entity types — such as Limited Partnerships, Limited Liability Partnerships, Limited Liability Limited Partnerships, and Business Trusts — might also be reporting companies.
Businesses, like Sole Proprietorships and General Partnerships, which do not register formation documents, do not have to file a beneficial ownership report.
FinCEN has identified 23 exemption categories. If an entity is in one of those categories and meets its specific exemption criteria, it does not have to submit a beneficial ownership report. The exemptions are primarily for entities already under close regulation by the federal and state governments.
Simply falling into any of these categories does not automatically make a reporting company exempt. Each category has specific criteria that must be met to qualify for exemption. Refer to FinCEN’s Small Entity Compliance Guide for details.
FinCEN will begin accepting BOI reports on January 1, 2024. Deadlines depend on when a reporting company was created or registered.
A reporting company’s beneficial owner is any individual who owns or controls 25% or more of the ownership interests of a reporting company or who directly or indirectly exercises substantial control over the entity.
Some types of individuals do not count as beneficial owners:
Any individual who owns or controls at least 25% of the ownership interests in a reporting company is considered a beneficial owner.
An ownership interest may be any of the following:
An individual has substantial control if they: 1) Are a senior officer (e.g., CEO, CFO, COO, or other executive level position with a high degree of authority); 2) Have the authority to appoint and remove senior officers and members of the board of directors or other governing body; or 3) Make, direct, or influence the company’s important decisions.
Important decisions could include those concerning things like reorganizations, mergers and acquisitions, making amendments to the company’s governance documents, adding or removing lines of business, expanding into different markets, determining senior officers’ compensation structures, dissolving the business, entering into contracts, and selling or leasing principal assets, etc.
Substantial control might be direct or indirect.
Examples of direct substantial control include:
Examples of indirect substantial control include:
Reporting companies must identify ALL individuals who meet the definition of a beneficial owner and do not qualify as an exception to the reporting rule.
A company applicant is a person who physically or electronically files a business registration application with the state to form an LLC, Corporation, or other legal entity or who files an application to register a non-U.S. to conduct business in the United States.
If more than one individual is involved in the reporting company’s formation filing process, both the person who directly filed the formation document and the individual who helped direct or control the filing must be included in the BOI report.
Unlike a lot of our competition, we make sure all pricing is clearly displayed upfront and pricing includes itemized details. We don’t push so-called free services from third parties trying to up-sell you, there are no hidden subscriptions, and you’ll never experience surprise charges.
No. Only domestic reporting companies created on or after January 1, 2024 and foreign reporting companies first registered to do business in the U.S. on or after January 1, 2024 must include their company applicants in their BOI report.
Reporting companies must include the following information about their business entity:
The information they must provide about their beneficial owners and company applicants include:
To streamline the report filing process, reporting companies, beneficial owners, and company applicants can obtain a FinCEN identifier, which eliminates the need to enter some of the specific details within the BOI report.
A FinCEN identifier is a unique number assigned upon request to a reporting company, beneficial owner, or company applicant. Reporting companies can use FinCEN identifiers to simplify and streamline completing their BOI forms. No one is required to obtain a FinCEN identifier.
A reporting company can request one by checking the designated box on its BOI report. Individuals may request a FinCEN identifier through an electronic application.
You’ll file your BOI report through FinCEN’s secure filing system, which will be available starting January 1, 2024. From that date forward, you can find instructions and technical guidance in the BOI section of the FinCEN website.
FinCEN requires reporting companies to file an updated report within 30 calendar days of when a relevant change occurs or when they realize they provided inaccurate information in their BOI report.
Indeed, there are! There could be civil penalties of up to $500 per day for each day a BOI report is late. Willful failure or attempt to provide false or fraudulent beneficial ownership information could bring criminal penalties, including imprisonment for up to two years and/or a fine of up to $10,000.
FinCEN will keep all the information it collects in a secure database. The information will not be publicly available. Federal, state, local, tribal, and foreign government officials may request to obtain beneficial ownership information for authorized activities related to national security, intelligence, and law enforcement. If the reporting company consents, financial institutions may have access to beneficial ownership information under certain circumstances.
Ultimately, reporting companies are responsible for filing their beneficial ownership information report and certifying the information is complete and correct. Any individual who files the BOI report as an agent of the reporting company certifies it on the entity’s behalf.
Unlike a lot of our competition, we make sure all pricing is clearly displayed upfront and pricing includes itemized details. We don’t push so-called free services from third parties trying to up-sell you, there are no hidden subscriptions, and you’ll never experience surprise charges.
If you need help determining whether you must file a BOI report or identifying who must be reported as beneficial owners or company applicants, consider getting guidance from an accountant or attorney.
And if you don’t feel confident preparing and filing the report on your own, ACO is here to act as your agent and file the report on your company’s behalf.
We pride ourselves on offering a fast, reliable, and hassle-free experience for our customers.
Unlike a lot of our competition, we make sure all pricing is clearly displayed upfront and pricing includes itemized details. We don’t push so-called free services from third parties trying to up-sell you, there are no hidden subscriptions, and you’ll never experience surprise charges.
