Earlier this year, businesses across the country were introduced to a new regulatory requirement under the US Corporate Transparency Act. This act mandates that companies disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). The goal is to increase transparency and combat financial crimes.
In this article, we’ll provide an overview of the filing requirement, answer frequently asked questions, and offer resources to help businesses stay compliant with the new regulations.
What is a Beneficial Ownership Information Report (BOIR)?
The Corporate Transparency Act created a new information reporting requirement for most companies (“reporting companies”) to report information on their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Certain companies may qualify for an exemption, discussed later.
The first step in the process is to determine whether the company is a reporting entity. This includes both domestic and foreign companies registered with a Secretary of State (as outlined by FinCEN). This applies to companies regardless of their status (active or inactive) and whether they report separately to the IRS. This includes, but is not limited to, corporations or LLCs classified as disregarded entities.
When are BOIRs Due?
Reporting companies that were formed prior to January 1, 2024 must file by January 1, 2025
Companies formed between January 1, 2024 and December 31, 2024 have 90 days from formation to file
Companies formed on or after January 1, 2025, as well as any entity that has already filed a BOIR and undergoes a change in beneficial ownership information, must submit or update their BOIR within 30 days of the formation or change.
What Happens if I Don’t File?
Willful failure to report complete or updated beneficial ownership information to FinCEN can trigger a $591/day civil penalty or criminal penalties including a fine up to $10,000 and/or up to two years in prison.
Where Can I File My Company’s BOI Report?
Given the complexities surrounding this new filing requirement, KRD recommends that you reach out to legal counsel to assist with identifying and satisfying your reporting requirements. Because these new requirements are non-tax, legal provisions, accounting firms cannot assist with the filing of BOI reports.
If you would prefer to file your BOIRs yourself, you can do so through the BOI E-filing portal at BOI E-FILING (fincen.gov) where you can either upload a PDF version of the BOIR or complete a web-based version.
Is There Any Relief From Filing?
Certain companies are exempt from BOI reporting and foreign companies who are not registered to do business in an U.S. state are not required to file. Companies that meet the criteria one of the 23 exemption may be provided relief from filing:
These exemptions have strict criteria that may include interpretation of various U.S. laws such as the Securities Exchange Act or Investment Company Act and a specific definition of an inactive entity. Given the legal nature of the exemption qualifications, it is recommended that companies reach out to their legal counsel to assist in determining whether they are exempt from BOI reporting.
What if an Owner Does Not Want To Provide Information to the Company?
The BOIR should include information on beneficial owners, including: full legal name, date of birth, current address, a unique identifying number and a picture of a U.S. passport, state driver’s license, other state-issued identification, or a foreign passport. Some beneficial owners may not be comfortable providing this information to the company due to the sensitivity of the information.
The beneficial owner can apply for a FinCEN Identifier directly with FinCEN which can be included on the BOIR in lieu of the investor providing the reporting company with their information and documentation.
Additional Resources
The BOI Compliance Guide: BOI Small Compliance Guide v1.1 (fincen.gov)
BOI Frequently Asked Questions: BOI FAQs (fincen.gov)
BOI Filing Quick Reference Guide (PDF): BOIR PDF Online Quick Reference Guide (fincen.gov)
BOI Filing Quick Reference Guide (online): BOIR E-File Online Quick Reference Guide (fincen.gov)
This information is being provided for your general education purposes and is not intended to constitute or be construed as legal advice.
