Beginning January 1, 2024, the U.S. Department of Treasury’s Financial Crimes Enforcement Network’s (FinCEN) new reporting requirements will go into effect. These changes will require millions of small business owners to file a form called the “Beneficial Ownership Information (BOI) Report”.
Here are some Frequently Asked Questions.
What is the Corporate Transparency Act?
The Corporate Transparency Act, originally enacted in 2021, was an attempt by Congress to protect against money laundering and the financing of terrorism by attempting to collect more information from business owners.
Who needs to file a BOI Report? Does this apply to me?
Most companies will be subject to filing the BOI Report. Any corporation, LLC, or similar entity formed by/in the United States or Tribal Government through the Secretary of State, Corporation Commission, or equivalent governmental agency is considered a “domestic reporting company”, and must file. Some foreign companies that do business in the United States will also be subject to this filing. Contact your business attorney or tax professional for more information to see if you are included.
When will I need to begin reporting?
Companies created before January 1, 2024, must file their initial report no later than January 1, 2025.
For companies created January 1, 2024, or later, a report will need to be filed within 30 calendar days of the date on which it receives notice that it has become effective.
Reports will be accepted electronically beginning January 1, 2024.
What kind of information will need to be reported?
You will need to report the business’ information, and specifically, the “beneficial owner’s” information. For the business, you need to expect to report the following information for your business entity:
(1) full legal name,
(2) any trade or “doing business as” names,
(3) complete current street address of the principal place of business,
(4) jurisdiction of formation, and
(5) taxpayer identification number.
The beneficial owner, who can be identified as an individual who has substantial control over the company (25% or more of the company’s interest, and/or has authority to make important decisions about the company’s operations will need to report their:
(1) full legal name,
(2) date of birth,
(3) complete current residential street address (except in the case of a company applicant who forms or registers an entity in the course of the company applicant’s business, who has to provide the street address of the business),
(4) unique identifying number and the issuing jurisdiction from either a current (i) U.S. passport, (ii) state or local ID document, (iii) driver’s license, or (iv) if the individual has none of those, a foreign passport, and
(5) an image of the chosen above document. (That’s right. They want a copy of your driver’s license or passport!)
How often will I need to report?
This is not just a one-time reporting requirement. A company will have 30 days to report any changes to reported information. For updates, the 30 days start from when the relevant change occurs. For corrections, the 30 days start after becoming aware of, or having reason to know of, an inaccuracy in a prior report. There are no safe harbors for filing an incorrect report.
Are there filing fees to file this report?
No, there are no filing fees associated with the BOI report. Please note, however, that if you choose to retain legal or tax professionals to help with the filing, there may be fees associated with that service.
Who will be able to access this information?
The information reported on the BOI is not public record, although the information will be available to a selection of individuals, including the following:
(1) federal agencies engaged in national security, intelligence and law enforcement,
(2) state law enforcement agencies with a court order,
(3) the Treasury Department,
(4) financial institutions with the company’s consent,
(5) government regulators of financial institutions, and
(6) certain foreign authorities requesting information through a U.S. agency.
What if I choose to not file this report?
We get it, disclosing personal information can feel onerous, and like an invasion of privacy, but failure to comply may come with stiff penalties. Civil penalties may include a daily fine of $500 up to $10,000. Criminal penalties, including jail time, may also be imposed for failure to comply.
Are there exemptions?
Yes, there are 23 specific types of entities that are exempt from filing a BOI Report with FinCEN – the following table can be used as a quick reference to see if an exemption applies to you:
If you believe one of these exemptions applies to you, we strongly suggest consulting your business attorney or tax professional to confirm your reporting requirements. To file your BOI report or access additional information visit www.fincen.gov/boi. You may also view the BOI Small Compliance Guide (fincen.gov)
Please be aware that FinCEN has already notified the public of fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act. Fraudulent correspondence may be titled “Important Compliance Notice” and asks the recipient to click on a URL or to scan a QR code. Those e-mails or letters are fraudulent. FinCEN does not send unsolicited requests. Please do not respond to these fraudulent messages, or click on any links or scan any QR codes within them.
Thank you to business attorney Brint Hiatt (Hiattlawaz.com in Mesa, Arizona) for contributing to this blog.
