Beneficial Ownership Information Reporting (Corporate Transparency Act)

Beneficial Ownership Information (BOI) Reporting

The regulations for beneficial ownership reporting are complex.  To ensure compliance, review the requirements below and contact us to assist you in completing this required reporting.  

Corporate Transparency Act

  • Enacted in 2021, as part of Bank Secrecy Act
    • Requires the disclosure of the beneficial ownership information of certain entities from people who own or control a company
    • Intent:
      • help U.S. law enforcement combat:
        • money laundering
        • the financing of terrorism
        • other illicit activity.
      • CTA is not a part of the tax code
      • BOI reports will not be filed with the IRS, but with FinCEN, another agency of the Department of Treasury.
      • Estimated 32.6 million businesses will need to comply

Entities Affected

  • Entities organized both in the U.S. and outside the U.S. may be subject to the CTA’s reporting requirements.
  • Domestic companies required to report include corporations, limited liability companies (LLCs) or any similar entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.
  • Domestic entities that are notcreated by the filing of a document with a secretary of state or similar office are not required to report under the CTA (individuals, trusts and sole proprietors)
  • Foreign companies required to report under the CTA include corporations, LLCs or any similar entity that is formed under the law of a foreign country and registered to do business in any state or tribal jurisdiction by filing a document with a secretary of state or any similar office.

Movie Time

BOI Reporting Video

Detailed Overview BOI

Exemptions

  • 23 categories of exemptions
    • Includes publicly traded companies
    • Banks and Credit Unions
    • Securities brokers/dealers
    • Public accounting firms
    • Tax exempt entities
    • Inactive entities
    • Large operating entities
      • 20+ employees in the U.S.;
      • Gross revenue over $5M on PY tax return; and
      • Physically present in U.S.

Filing Dates

  • There are different filing timeframes depending on when an entity is registered/formed or if there is a change to the beneficial owner’s information.
    • New entities (created/registered in 2024) — must file within 90 days
    • New entities (created/registered after 12/31/24) — must file within 30 days
    • Existing entities (created/registered before 1/1/24) — must file by 1/1/25
    • Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports — must file within 30 days

How to File

  • Similar to FBAR, FinCEN will have an electronic filing system available via FinCEN’s website. The system will not be available until January 1, 2024.
  • FinCEN working to create a third-party e-filing system to allow third parties to help businesses meet their filing obligation.

Required Disclosures

  • Entity Information
    • Name of reporting entity
    • Trade name or DBA
    • Business Address
    • State
    • TIN
  • Beneficial Owner Information
    • Name
    • Birthdate
    • Address
    • Unique ID Number (driver’s license or passport), including image
  • For new entities: Details of Company Applicant!!

Who is a beneficial owner?

  • Any individual who, directly or indirectly, either:
    • Exercises “substantial control” over a reporting company, or
      • An individual has substantial control of a reporting company if they direct, determine or exercise substantial influence over important decisions of the reporting company. This includes any senior officers of the reporting company, regardless of formal title or if they have no ownership interest in the reporting company.
    • Owns or controls at least 25 percent of the ownership interests of a reporting company
      • “Ownership interests” generally refer to arrangements that establish ownership rights in the reporting company, including simple shares of stock as well as more complex instruments.

Who is a company applicant?

Company applicants include:

  • The individual who files the document that creates the entity or that first registers the entity to do business in the U.S., and
    • The individual primarily responsible for directing or controlling the filing of such document.
  • Entities created before January 1, 2024, do not need to report company applicant information. Newly created entities will need to report company applicant information but will not be required to update it.
    • FinCEN Identifier
    • Individuals may provide relevant information to FinCEN directly and obtain a “FinCEN identifier” upon request.
    • The FinCEN identifier can then be provided to reporting companies in lieu of the person’s personal information. 
    • Any reporting companies for which the individual is a beneficial owner or company applicant may report this identifier in lieu of the required information on the BOI report.
    • Individual responsible for reporting changes to underlying personal information

Penalties for Non-Compliance

  • Civil penalties are up to $500/day that a violation continues
  • Criminal penalties include a $10,000 fine and/or up to two years of imprisonment
  • Furthermore, if any person knowingly discloses or inappropriately uses BOI they may be fined $500 per day up to $250,000 and imprisoned for up to 5 years.

Users of the information

  • S. federal agencies engaged in national security, intelligence, and law enforcement activities;
  • State, local, and Tribal law enforcement agencies with court authorization;
  • The U.S. Department of the Treasury;
  • Financial institutions using beneficial ownership information to conduct legally required customer due diligence, provided the financial institutions have their customer consent to retrieve the information;
  • Federal and state regulators assessing financial institutions for compliance with legally required customer due diligence obligations; and
  • Foreign law enforcement agencies and certain other foreign authorities who submit qualifying requests for the information through a U.S. federal agency.

Resources

We can help with BOI reporting for your business, please contact us today at info@adccpa.com

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Author: Anthony Rita

Author: Anthony Rita

DIRECTOR - COMMERCIAL SERVICES PRACTICE LEADER
Anthony brings over 20 years of combined experience in the areas of corporate accounting, auditing, and tax.

Commercial Services & Manufacturing

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