201-401-6904

2601 Hemingway Lane, Mahwah, NJ 07430

Beneficial Ownership Interest (BOI) aka The Corporate Transparency Act

As a business owner, you are probably aware of new legislation that requires certain entities to disclose information about their company to FinCEN by year end.  The legislation has garnered wide-spread criticism; however, it continues to chug along with substantial penalties for failure to file.  The US Treasury recently released it final rulings on capturing key beneficial ownership details on certain companies, a move aimed to address deemed areas of fincrimes through shell companies and alike.

The rule describes who must file a beneficial ownership (BOI) report, what information must be reported and when a report is due.  In short, the rule requires reporting companies to file reports with FinCEN that identify two foundational categories of individuals:

Beneficial Owners and Entities

This ensures that key details on company formation agents, law firms and professional services firms are captured.

Beyond that, the just-released rulemaking, the first of three tied to the CTA, covers key details such as filing types: foreign and domestic and more detailed definitions of what beneficial owner means – for example, 25 percent ownership or someone who has “substantial control” of a firm.

The final rule also gives more depth and texture to detailing types of company applicants and information identifiers.  This includes a system where individuals can directly query FinCEN for unique “identifiers” in lieu of constantly sending the required four pieces of identify documents as well as finalizing nearly two dozen exemptions, such as those already covered by anti-money laundering (AML) compliance rules and other details.

So let’s get to the details:

Who has to file beneficial ownership information?

Beneficial Ownership Information encompasses details about individuals who directly or indirectly own or control a company.

There are two types of reporting companies that fall within the BOI rules set out by FinCEN:

Domestic reporting companies – these are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar US office.

Foreign reporting companies – these are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the US by the filing of a document with a secretary of state or any similar office.

There are some exemptions to these reporting companies, including publicly traded companies meeting specified requirements, some nonprofits, and certain large operating companies. However, the reporting obligation is far-reaching and impacts millions of businesses in the US and businesses around the world who operate in the United States.

What does substantial control mean?

Someone can exercise substantial control over a company in different ways, and there are different regional variations for the definition of substantial control, as well as beneficial ownership. Adding individuals with significant control is a newer concept in the US introduced as a requirement in the CTA. According to FinCEN, if an individual fits ANY of the following criteria, they could be deemed to be exercising substantial control:

  • Someone who is a senior officer (the company’s president, chief financial officer, general counsel, chief executive office, chief operating officer, or any other officer who performs a similar function).
  • Someone with the authority to appoint or remove certain officers or a majority of directors of the reporting company.
  • Someone who is an important decision-maker within or for the reporting company.
  • Someone with any other form of substantial control over the reporting company (such as someone with influence over important decisions).

Under the Corporate Transparency Act, who can access beneficial ownership information?

Under the Act, authorized entities, including federal, state, local, and tribal officials, along with certain foreign officials, can access beneficial ownership information for national security, intelligence, and law enforcement purposes.

Financial institutions may also gain access under specific circumstances, with consent from reporting companies. However, access to this information isn’t a given; it’s not ubiquitous, even though other organizations and entities may benefit from accessing it for due diligence and risk management purposes.

When and how do entities need to file beneficial ownership information?

  • Companies that are required to report their beneficial ownership information to FinCEN, need to do so electronically through a secure filing system available at: https://boiefiling.fincen.gov/. Information on beneficial owners includes names, dates of birth, addresses and identifying numbers such as a passport or driver’s license. The report can be filed by anyone with authority from the reporting company such as an employee, owner or third-party service provider.
  • Any reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial BOI report.
  • Any reporting company created or registered in 2024 will have 90 calendar days to file after receiving actual or public notice that its creation or registration is effective.
  • Companies created or registered prior to January 1, 2024, have until January 1, 2025, to file.
  • Any reporting company created or registered on or after January 1, 2025, will have 30 calendar days to file after receiving actual or public notice that its creation or registration is effective.

Any changes to the ownership or control will also require businesses to file with FinCEN within the associated timeframe.

What are the consequences of not filing or mis-filing beneficial ownership information?

  • The penalties for violations or misreporting can be severe. Anyone willfully violating the reporting requirements could be liable for penalties of up to $500 for each day of continuing violation and criminal penalties include up to two years imprisonment and up to a $10,000 fine.

Currently mistakes or omissions can be corrected within 90 days of the deadline for the original report. However, firms could face civil and criminal penalties for disregarding their BOI reporting obligations.

One last note: If you need assistance in completing the application, you may want to consider in this order: (1) the FINCEN website, which has numerous “Help” areas to assist; (2) a third-party (just Google BOI submission and you’ll see plenty of third party providers; (3) your accountant—although the accounting field is still trying to determine if this is a function accountants can provide assistance with; and (4) your attorney (who’ll more than likely charge you more than the combined 3 above).  If you know the information requested above, you should be able to complete this application on behalf of your company.

Where to File:

https://boiefiling.fincen.gov