By now, you have probably heard about the new reporting requirements for Beneficial Ownership Information. These new requirements, effective January 1, 2024, apply to both domestic and foreign companies created or registered to do business in the US by filing a document with the Secretary of State (or similar office) and target small businesses. However, certain types of businesses are exempt from filing (e.g. nonprofits, banks, large operating companies, inactive entities, etc.). Below, we provide background about the law, its purpose, who must file, what information must be provided, and filing deadlines.
Culpepper CPA can take care of this filing requirement for you, and we have streamlined the process for doing so. To engage our firm to handle these responsibilities, simply click here, complete this form, and email it – along with the necessary attachments (clean copies of a driver’s license or passport) for all beneficial owners – to BOI@Culpepper-CPA.com. This provides us the information to handle this filing for you and our terms and fees for doing so.
For more information on the beneficial ownership information reporting requirements, or how to handle this filing yourself, keep reading below!
Background.
The Corporate Transparency Act expanded anti-money laundering laws and created new reporting requirements for businesses operating in the US. Beginning in 2024, many small businesses must report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). This is an effort to create a national database for use by national security and law enforcement agencies to prevent the use of shell companies for criminal activity.
Who Must File.
Both domestic and foreign reporting companies must file reports. A company is a reporting company if created by a filing with the Secretary of State or similar office. Thus, corporations (including S corporations), LLCs, and other entities formed through the SOS are subject to the reporting requirements. But, because sole proprietorships/independent contractors, trusts, and general partnerships do not require the filing of a formal document with the SOS, they generally are not considered a reporting company and will not have a beneficial ownership information filing requirement. Similarly, foreign companies must file if they are registered with the SOS or similar office under state law.
Some companies are exempt from reporting, but many of these already report beneficial ownership information to a governmental authority. For example, there is an exemption for large operating companies. A large operating company is any entity with (a) more than 20 full-time US employees, (b) an operating presence at a physical office within the US, and (c) more than $5,000,000 of US-sourced gross receipts reported on its prior year federal income tax return. If you meet these qualifications, you are not subject to the new reporting requirements.
What Information Must be Provided.
Beneficial ownership information (BOI) must be reported for the reporting company’s beneficial owners. For entities formed or registered after 2023, the same information must also be reported for company applicants. BOI includes an individual’s full legal name, date of birth, street address and a unique ID number. The unique ID number can be from a non-expired US passport, state driver’s license, or other government-issued ID card. If the individual does not have any of those documents, a non-expired foreign passport can be used. Also, reporting companies must include an image of the document showing the unique ID number with the report.
Beneficial Owners.
FinCEN considers two groups of individuals to automatically be beneficial owners of a reporting company: (1) any individual who directly or indirectly owns or controls at least 25% of the ownership interests of the reporting company; or (2) any individual who exercises substantial control over the reporting company.
Individuals with substantial control are those with substantial influence over important decisions about a reporting company’s business, finances, and structure. Senior officers (president, CFO, general counsel, CEO, COO, and any other officer who performs a similar function) are automatically deemed to have substantial control, as are individuals with the authority to appoint or remove senior officers and board members. Importantly, these individuals aren’t required to have actual ownership to be considered beneficial owners for reporting purposes.
Company Applicants.
The company applicant is the person who actually files the document creating the reporting company (e.g., an attorney). If the reporting company is formed after 2023, Company applicants must provide the same information as beneficial owners. However, because of the difficulty in tracking down information about company applicants for reporting companies that have been in existence for a number of years, reporting companies formed or registered before 2024 do not have to supply BOI for their company applicants.
FinCEN Identifiers.
Individuals and reporting companies can request a FinCEN ID to use in place of supplying detailed information on the report. FinCEN assigns this unique number. It is obtained by submitting the same information as is required of a beneficial owner or reporting company. A FinCEN ID may be useful to individuals that prefer to send their personal information directly to FinCEN rather than through a reporting company, or to individuals that may be required to supply information as a beneficial owner or company applicant of several reporting companies.
Important Filing Dates.
Existing reporting companies created or registered before 2024 must file the initial report by January 1, 2025. On the other hand, reporting companies created in 2024 only have 90 days after the entity’s creation. Further, reporting companies created after 2024 must file the initial report within 30 days of the entity’s creation.
If there is a change to previously reported information about the reporting company or its beneficial owners, reporting companies must file an updated report within 30 days of the change. So, it’s imperative to implement a system to identify reportable changes and file updated reports in a timely manner. The penalties for willfully failing to file both initial and updated reports are a steep $500 per day, up to $10,000 and imprisonment for up to two years.
How to File.
BOI reports must be filed electronically. FinCEN’s e-filing portal, available at https://boiefiling.fincen.gov/ , provides two methods to submit a report: (1) by filling out a web-based version of the form and submitting it online, or (2) by uploading a completed PDF version of the BOI report. The person who submits the BOI report will need to provide their name and email address to FinCEN. There is no fee for filing the report.
FinCEN also has a Small Entity Compliance Guide and frequently asked questions to help guide businesses through the reporting requirements. Thus, if you choose not to have Culpepper CPA serve as your third party representative to take care of these filing requirements, please refer to this guide for assistance with self-filing: https://www.fincen.gov/boi/small-business-resources.
