What you need to know about the New Beneficial Ownership Information (BOI) Reporting
Finberg Firm
In an effort to increase transparency and combat financial crimes such as money laundering and tax evasion, new legislation and reporting obligations will require certain business entities to step up their transparency and disclose ownership information to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). This new compliance requirement for businesses shall be implemented beginning January 1, 2024.
Corporate Transparency Act (CTA)
As part of the Anti-Money Laundering Act of 2020, the Corporate Transparency Act (CTA), which has been enacted on January 1, 2021, empowers FinCEN with the mandate to gather consistent ownership details from corporations, limited liability companies (LLCs), and various other entities legally operating within the United States.
The CTA is a significant step toward increasing transparency and accountability in corporate ownership, which helps authorities better detect and prevent financial crimes. It aims to curb the misuse of anonymous shell companies for illegal purposes by providing law enforcement agencies with access to valuable ownership information.
New Information Ownership Information (BOI) Reporting
Beneficial ownership information refers to identifying information about the individuals who directly or indirectly own or control a company. There are two (2) types of reporting companies: domestic reporting companies and foreign reporting companies.
A domestic reporting company includes:
- A corporation
- A limited liability company; or
- Any other entity created by filing a document with a secretary of state or any similar office under the law of a State or Indian tribe.
A foreign reporting company includes:
- a corporation, limited liability company, or other entity formed under the law of a foreign country; and
- registered to do business in any U.S. state or in any Tribal jurisdiction, by the filing of a document with a secretary of state or any similar office under the law of a U.S. state or Indian tribe.
Reporting Filing Dates
A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report.
While a reporting company created or registered on or after January 1, 2024, will have 30 days to file its initial beneficial ownership information report. This 30-day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.
What are the requirements in filing a BOI report?
Company information on the report should contain:
- Entity’s legal name;
- Any trade or “doing business as” (d/b/a) names;
- Federal Taxpayer Identification Number;
- The current street address of its principal place of business if that address is in the United States, or, for reporting companies whose principal place of business is outside the United States, the current address from which the company conducts business in the United States (for example, a foreign reporting company’s U.S. headquarters);
- State of formation;
- Type of filing (initial, correction, or update)
Individual information for beneficial owner or company applicants should contain:
- The individual’s name, date of birth, and address.
- A unique identifying number from an acceptable identification document (a non-expired passport, valid driver’s license, etc.) along with an image or scanned copy of the document.
- The name of the state or jurisdiction that issued the identification document.
- Residential street address for beneficial owner.
- Residential or business street address for company applicant(s) (depending on their role).
Penalties
The CTA imposes civil penalties of $500 per day up to $10,000 and/or imprisonment for up to two years if you fail to file, or if you submitted inaccurate records, and willingly provide false information.
To reiterate, BOI reports can be submitted no earlier than January 1, 2024, so make sure to comply with the reporting requirements whether you are a domestic or foreign business entity. To learn more about this upcoming reporting requirement, you may watch this video released by the U.S. Department of the Treasury https://www.youtube.com/watch?v=qP5V9k3ypl0 or read the FAQs page at https://www.fincen.gov/boi-faqs