📢 FinCEN Beneficial Ownership Information (BOI) reporting

We’re just a few weeks away from the new year. That means, among other things, the advent of the Corporate Transparency Act’s requirement for most corporations and limited liability companies (LLCs) to report their beneficial ownership information (BOI).

You’ve probably heard of it, but let’s dive a bit deeper to understand what it entails and how it impacts your business.

What is the Corporate Transparency Act?

Congress passed the Corporate Transparency Act (Title LXIV of the National Defense Authorization Act of 2021, now codified as 31 USC §5336) to counter the proliferation of anonymous registered entities arranged in complex structures, permitting money laundering and financing of terrorism.

The CTA goes into effect January 1, 2024, and requires every legal entity registered in a US state to submit a BOI report to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The report contains information about the reporting company, its beneficial owner(s), and the company applicant.

2023 tax filing starts in a few weeks! Are you prepared? If not, click here to schedule a call to discuss working together.

Which companies need to report?

Every corporation, limited liability company (LLC), or other entity registered with a secretary of state or Indian tribe (or any foreign entity registering to do business with a state or Indian tribe) must submit a BOI report to FinCEN.

Note that some companies are exempt from reporting. Note these three exemptions in particular:

A tax-exempt entity,
An inactive entity, or
A large operating company, defined as one with over 20 full-time employees (not FTE) and gross revenues over $5 million.

The report includes the following information about the entity:

Business name,
Current address,
State of formation,
EIN, and
The following for each direct or indirect beneficial owner: name, address, date of birth, and a unique identifying number from a government-issued ID (nonexpired driver’s license or passport).

Who is a beneficial owner?

A beneficial owner either exercises substantial control over a reporting company or owns or controls at least 25 percent of the ownership interest. NB Review these definitions carefully. Not all equity owners may qualify as beneficial owners, and non-equity officers may qualify as beneficial owners.

An ownership interest can take a variety of forms. For purposes of BOI, ownership can include equity, stock, voting rights, a capital or profit interest, options, convertible instruments, and any other form of ownership.

Substantial control can include a variety of powers, such as exercising the authority of a senior officer, the ability to appoint or remove senior officers, and the power to make important or strategic decisions.

An individual may hold indirect ownership or substantial control through any contract, arrangement, understanding, relationship, or otherwise, including through parent and subsidiary companies. A subsidiary that is not exempt must file its own BOI report.

Five types of individuals are automatically exempt from being considered beneficial owners: minor children; nominees, intermediaries, custodians, or agents; non-equity employees lacking substantial control; those with only a right of inheritance to an ownership interest; and creditors.

Who is a company applicant?

A company applicant is a person who directly files, or is primarily responsible for directing or controlling the filing of, the document that creates or registers the company. NB The applicant is not defined as the person filing the report on behalf of the company. There is no statutory mention of a preparer, reporter, or any such role.

Companies formed before January 1, 2024 will not have to report a company applicant.

When are initial reports due?

For entities in existence on January 1, 2024, the initial report is due by January 1, 2025.

For entities created in 2024, the initial report is due 90 days after receiving notice of the company’s creation or registration.

For entities created after 2024, the initial report is due 30 days after receiving notice of the company’s creation or registration.

FinCEN will not accept reports prior to January 1, 2024, which is just fine, because we don’t have any way of filing reports yet!

What if the information changes from the initial report?

If any information in an initial BOI report changes, the company must file an update report within 30 days of the change.

Reportable changes include any changes to the name or address of the reporting company, changes to the name or address of a beneficial owner, or a new beneficial owner.

Will JWellsCFO handle these reports if I’m a customer?

No. JWellsCFO customers will need to file their own FinCEN reports; however, I’m happy to discuss your company, its requirement to file a report, and who in your company may be a beneficial owner.

Once we have more information about how to file these reports, I’ll share that with you as well.

Let me know if you have a question or need any help regarding BOI reporting or your business in general.

If you are not a current JWellsCFO customer, click here to schedule a call to discuss working together.