Starting January 1st, 2024 companies registered in any state face a new Beneficial Ownership Information (BOI) Report disclosure as determined in the Corporate Transparency Act (31 USC 5336). Foreign companies registered to do business in the United States shall also disclose beneficial owners under the same rules applicable to their US counterparts.
What is the definition of a reporting company?
A reporting company is any domestic entity organized in any of the 50 states, the District of Columbia, or tribal government, and companies formed outside the United States, that have registered to do business within the United States.
• Domestic reporting companies are corporations, S-corporations, associations, limited liability companies (LLCs), general and limited partnerships, trusts, foundations, and any other entity created with a Secretary of State or similar office in the United States.
• Foreign reporting companies are entities formed under the law of a foreign country and registered to do business in the United States by the filing of a document with a Secretary of State or any similar office.
A reporting company exemption is granted to governmental authorities, banks, insurance, financial institutions, tax-exempt entities, public utilities, pooled investment vehicles, securities brokers, agents, dealers, and all other large corporations registered under the Exchange Act.
Who is the beneficial owner?
"Beneficial owner" refers to the individual who enjoys the benefits of ownership, even when legal ownership of the entity is in another name. In other words, the beneficial owner is the true owner who ultimately benefits from and who directly or indirectly owns or controls a company.
The regulations further limit the scope of beneficial ownership information reporting to:
- Individuals who either directly or indirectly control at least 25% of the reporting company’s capital, equity, units, stock, shares, voting rights, or any other instrument used to establish ownership. For example, a U.S. partnership or LLC with 4 individual partners sharing partnership interest equally shall separately identify all 4 individual partners as beneficial owners. Likewise, a single-member LLC will generally have only one beneficial owner.
- Individuals who exercise substantial control over the reporting company. Common examples include senior officers and executives of a corporation (Chief Executive Officer, President, Chief Financial Offer, and the like). Individuals with substantial control may also make important decisions or have the authority to appoint or remove senior officers (such as a chairman of the board of directors).
What are the company applicant disclosure requirements?
In addition to the beneficial owners, newly formed reporting companies shall also disclose information about the company applicants. The company applicants are individuals who are involved in the actual organization or creation of the company, by filing or directing others to file, the reporting company’s formation documents with the applicable Secretary of State, tribal government, or foreign commercial register. Company applicants may cover attorneys, lawyers, paralegals, and the like agents acting on behalf of the beneficial owners and/or the reporting company.
What is the content of the Beneficial Ownership Information (BOI) Report?
The BOI Report contains the reporting company’s registration information and identifies the beneficial owners. The information required to be included in the report is:
- The reporting company’s name and address;
- Doing business name if applicable;
- Full name, address, and personally identifiable information of the beneficial owner(s) and the company’s applicant(s) where applicable;
What are the BOI reporting due dates?
The BOI report shall be electronically filed with the FinCEN. The FinCEN is a separate agency within the Department of the Treasury. The initial BOI reporting deadline depends on the entity’s formation date as follows:
- A US company organized before January 1st, 2024 shall file the initial BOI Report no later than January 1st, 2025;
- A foreign company registered to do business in the United States before January 1st, 2024 shall also file the initial BOI Report not later than January 1st, 2025;
- Any domestic reporting company organized in 2024 or a foreign company registered to do business in the United States at any time during 2024 is granted 90 days to file the BOI report;
- All other reporting companies shall file the initial BOI report within 30 days of formation;
Shall I file the BOI report annually?
No. Most companies would not be required to amend or supersede the initial BOI report. An updated BOI report shall be filed if there is a change in the beneficial ownership information. For instance, a corporation shall update the BOI report if any individual acquires 25% or more of the voting stock of the entity at any time after the initial BOI report has been filed. Such a change in the beneficial ownership interest shall be disclosed no later than 30 days from the events giving rise to the reporting requirement. Reporting companies that have been dissolved or terminated before the report's due date are not required to disclose beneficial ownership information and shall not file a BOI report.
What are the penalties for non-compliance with the BOI report?
Each person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day the violation continues. A person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, filing false beneficial ownership information, or failing to correct or update previously reported beneficial ownership information. Furthermore, both individuals and corporate entities could be held liable to penalties for willful violations of the BOI reporting requirements.
How much does it cost to file the BOI Report?
Should you wish to authorize us to submit the report on behalf of your entity or clients, our processing fees start as low as $179.00 for entities with a single beneficial owner. Submit a quote or authorize the BOI report through your dedicated user account. A beneficial owner, entity, or authorized representative may also file the BOI report for free through the FinCEN.