What Is Beneficial Ownership Information Reporting?
Beneficial Ownership Information reporting is a federal requirement under the Corporate Transparency Act (CTA). It includes information about all the beneficial owners of a company.
Who Is Considered a Beneficial Owner?
A beneficial owner is either someone who indirectly or directly exercises considerable control over a reporting company or someone who has control over at least 25% of the company’s ownership interests.
What Is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) is a federal law in the United States that aims to increase corporate ownership transparency. The law requires individual beneficial company owners to give the Financial Crimes Enforcement Network (FinCEN):
- their full legal name
- their birthdate
- their current residential address
- their federally issued identification number from a passport or driver’s license
As for companies, they are required to provide
- their legal entity name or “doing business as” name,
- their business address,
- their state jurisdiction of formation registration,
- their IRS TIN,
Furthermore, any changes to the reporting information above must be updated with the FinCEN within 30 days.
What Is Considered a Reporting Company?
A company required to report a BOI is called a reporting company. A reporting company has two types: domestic and foreign.
A domestic reporting company is a corporation, limited liability company (LLC), or another entity created by filing a document with a secretary of state’s office or any similar office in the United States.
A foreign reporting company is any entity (including corporations and LLCs) created under a foreign country’s law and registered to do business in the United States by filing a document with a secretary of state’s office or any similar office.
There are 23 types of entities exempted from the reporting requirements. The FinCEN website lists those entities.
What Is the Reporting Process?
You can undergo the reporting process via FinCEN’s website’s online portal. You can begin filing on January 1, 2024, with a one-year initial filing window (that is, you can file for an initial BOI reporting from January 1, 2024, until January 1, 2025). FinCEN will only accept BOI reporting on January 1, 2024. No fee is required.
New entities launched after December 31, 2023, must report within 90 days.
Companies that fail to file a complete report can face heavy civil ($500/day) and criminal penalties (up to $10,000).
Check with your tax accountant or CPA to ensure you and your firm comply with BOI reporting requirements.
