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What to know about beneficial ownership information requirements

by | Jan 4, 2024 | Business & Commercial Law

Starting on January 1, 2024, small businesses, entrepreneurs and start-ups will be required to report Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN) under the Corporate Transparency Act. This law makes it more difficult for people to hide money through shell companies and similar tactics.

Do I have to submit a BOI report?

The range of companies that must report is wide. You must submit a report if you created a company in the U.S. by filing with the secretary of state or a similar entity. The same applies to foreign companies registered to do business in the U.S.

However, there are 23 types of exempt entities, including publicly traded companies, nonprofits and most (but not all) sole proprietor businesses.

Failing to submit a BOI report can result in civil and criminal penalties, including fines and imprisonment.

What do I have to report?

Reporting forms will ask for the company’s legal name, trade name(s), the physical address of the company (no PO boxes), jurisdiction of formation, and a Taxpayer Identification Number.

Additionally, each beneficial owner must submit their name, date of birth, address and a unique identifying number from a legal ID, such as a driver’s license or a passport.

What exactly is a “beneficial owner?”

A beneficial owner is precisely as it sounds: the person who has principal control over the company or controls at least 25% of the company’s interests through stock, equity or voting rights.

Obvious examples would be the president, CEO, CFO, COO or anyone serving in a senior officer role.

When must a company report?

FinCEN will make reporting forms available on January 1, 2024.

Any company created or registered before January 1, 2024, must report BOI before January 1, 2025. Companies created on or after January 1, 2024, but before January 1, 2025, will have 90 days to report BOI. Companies created on or after January 1, 2025, will have 30 days to report.

The clock starts ticking when a company receives confirmation of its registration or the secretary of state (or a similar entity) releases a public notice of its creation, whichever happens first.

Companies will only need to submit a BOI report once, but if there are any updates to the BOI, you must report them within 30 days.

I have a lot more questions!

The Financial Crimes Enforcement Network has already posted more than 70 frequently asked questions. You can find the complete list here.