New Federal Reporting Requirement for Beneficial Ownership Information (BOI)

New Federal Reporting Requirement for Beneficial Ownership Information (BOI):

Beginning on January 1, 2024, many companies in the United States will have to report information about their beneficial owners, i.e., the individuals who ultimately own or control the company. They will have to report the information to the Financial Crimes Enforcement Network (FinCEN). FinCEN is a bureau of the U.S. Department of the Treasury.

The Beneficial Ownership Reporting (BOI) Broad overview and key questions :

• What is it:

The bipartisan Corporate Transparency Act was enacted in 2021 to increase the transparency of beneficial owners of businesses, both domestic and foreign, to combat illicit activities via shell companies and other murky ownership structures.

You can look up more information on the FinCen website:  https://www.fincen.gov/boi

• Who is required to file?

Reporting companies include corporations, limited liability companies, limited liability partnerships, and business trusts, among other types of legal entities, that are:

1. Created through the filing of organization documents with the Secretary of State or similar office of any state or Indian tribe; or
2. Formed under the laws of a foreign jurisdiction and registered to do business in any state or tribal jurisdiction by reason of having filed a document with the Secretary of State or similar office of any state or Indian tribe.

• Who is a beneficial owner?

A beneficial owner is any individual who exercises substantial control over a reporting company; or

who owns or controls at least 25 percent of the company.

*Please note that if an ownership interest in a reporting company is held through a trust, individuals, including grantors, beneficiaries, and trustees, may be considered to own or control ownership interests through the trust, depending on the specific circumstances. Analyzing whether a trust can itself be a reporting company or whether beneficial ownership in a reporting company is held through a trust can be complex and should be evaluated in consultation with legal counsel.

https://www.fincen.gov/boi-faqs#C_2

WHO IS A COMPANY APPLICANT?

There can be up to two individuals who qualify as company applicants — (1) the individual who directly files the document that creates, or first registers, the reporting company; and (2) the individual that is primarily responsible for directing or controlling the filing of the relevant document.

Your company is only required to report its company applicants if it is created or registered on or after January 1, 2024.

• What specific information does my company need to report?

A reporting company will need to provide: (1) its legal name and any trade name or DBA; (2) its address; (3) the jurisdiction in which it was formed or first registered, depending on whether it’s a U.S. or foreign company; and (4) its Taxpayer Identification Number (TIN).

For each of your company’s beneficial owners and each company applicant (if required), your company will need to provide the individual’s: (1) legal name; (2) birthdate; (3) address (in most cases, a home address); and (4) an identifying number from a driver’s license, passport, or other approved document for each individual, as well as an image of the document that the number is from.

https://www.youtube.com/watch?v=GydCvfbKxPw&t=7s

• When should my company file its initial report?

If your company is created or registered before January 1, 2024, file by January 1, 2025.

If your company is created or registered after January 1, 2024, but before January 1, 2025, file within 90 calendar days of creating or registering your company.

If your company is created or registered after January 1, 2025, file within 30 calendar days of creating or registering your company.

• What if there are changes to or inaccuracies in reported information?

Your company will have 30 days to report any changes to reported information.  Changes include a change of address, phone number etc…

For updates, the 30 days start from when the relevant change occurs. For corrections, the 30 days start after you become aware of, or have reason to know of, an inaccuracy in a prior report.

• What are the Penalties for violating the CTA reporting requirement?

Violation of the CTA reporting requirement carries penalties of $500 /day.

WHAT COMPANIES ARE EXEMPT FROM BOI FILING?

A corporation, LLC or other entity is not considered a reporting company, and is not required to file a report, if it qualifies for one of the following 23 exemptions:

1. Securities reporting issuer
2. Governmental authority
3. Bank
4. Credit Union
5. Depository institution holding company
6. Money services business
7. Broker or dealer in securities
8. Securities exchange or clearing entity
9. Other exchange Act related entity
   1. Any entity other than securities reporting issuer, broker or dealer in securities exchange or clearing agency
10. Investment company or investment broker
11. Venture capital fund advisor
12. Insurance company
13. State-licensed insurance producer
14. Commodity Exchange Act registered entity
15. Accounting firm
16. Public utility
17. Financial market utility
18. Pooled investment vehicle
19. Tax exempt entity
    1. Any entity that is exempt as described in Sec 501(C) of the Internal Revenue Code, a political organization as defined in the code, or a trust as described in the code.
20. Entity assisting a tax-exempt entity
21. Large operating company
    1. Any entity that employs more than 20 full-time employees in the United States reporting more than $5,000,000 in gross receipts or sales in the previous year.
22. Subsidiary of certain exempt entities
    1. Any entity whose ownership interests are controlled or wholly owned by one or more entities in exemptions 1,2,3,4,5,7,8,9,10,11,12,13,14,15,16,17,19, or 21
23. Inactive entity – Must meet all of these conditions:
    1. In existence on or before January 1, 2020
    2. Not engaged in active business
    3. Not owned by a foreign person,(directly or indirectly, wholly owned or partially)
    4. Experience no change in ownership in the preceding 12 months
    5. Not sent or received any funds in an amount greater than $1,000 in the preceding 12 months
    6. Does not hold any kind or type of assets, in the United States or abroad

Business Owner’s should note:

• You should also note that some states are also requiring similar filings.
• It is currently unlawful for a CPA in some states (NJ) to file these forms on your behalf, our professional recommendation is to consult a legal professional to determine if your entity has a filing requirement and to assist you in your filing.

DISCLAIMER
Starting in 2024, the Corporate Transparency Act (CTA) took effect, and many corporations, limited liability companies, and other entities may be required to start reporting Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN). Compliance requirements are available at https://www.fincen.gov/ including deadlines and potential severe penalties. PLEASE be advised our engagements do not include BOI reporting, nor any similar state-mandated reporting. Accordingly, we will not be preparing nor filing any such required reports, as they do not qualify as tax returns and such services may be considered the practice of law. However, we are available to discuss how we might assist you in planning to address this new reporting.