New Federal Beneficial Ownership Information (BOI) Reporting Requirement for U.S. Businesses
New rules under the Corporate Transparency Act (CTA) now require many U.S. businesses to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the U.S. Department of the Treasury. The information would include who, directly or indirectly, exercises substantial control over a reporting company or own at least 25 percent of the ownership interests of a reporting company.
This new federal reporting requirement, known as the request for Beneficial Ownership Information (BOI), is an attempt to provide greater transparency, reducing illegal and criminal behavior in finance. Companies that are required to report their BOI are known as “reporting companies.” Reporting companies may fall under one of two categories:
- Corporations, limited liability companies, or entities “otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state.”
- Foreign companies that are registered to do business in any U.S. state.
There are several types of companies that may be exempt from BOI reporting. These include governmental authorities, banks/credit unions, brokers/dealers in securities, insurance companies, public utilities, and tax-exempt entities, among others.
Reporting your company’s BOI is a fairly simple process and can be done electronically through FinCEN’s website: www.fincen.gov/boi, which is secure and free of charge. Reporting is generally a one-time requirement. However, if a company needs to update or correct their beneficial ownership information, they will need to file an updated report within 30 days of the change. For company created:
- Prior to January 1, 2024, they will have until January 1, 2025, to report their BOI.
- After January 1, 2024, they will have 90 calendar days to report their BOI.
- After January 1, 2025, they will have 30 calendar days to report their BOI.
While this additional reporting requirement may feel like a hassle to some, it was ultimately enacted to protect companies and their owners from fraud and illicit acts. As stated earlier, the reporting is quite simple and should not take a lot of time to complete. It is extremely important to comply with the new reporting requirement since failure to do so can lead to civil or even criminal penalties.
It is important to be mindful of the reporting deadlines, especially if you have created or plan to create a new company in 2024. If your company was created prior to 2024, we recommend completing the report as soon as possible to avoid any issues trying to file the report before the submission deadline in late December. If you have any questions about this new reporting requirement, or would like us to fill out the report on your behalf, please reach out to our firm. As always, our job is to make your life less taxing.