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Reporting Requirements: Beneficial Ownership Information (BOI)

Under the Corporate Transparency Act, millions of businesses are required to file a beneficial ownership information (“BOI”) report with the Financial Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Treasury Department. 

Each BOI report provides basic information to FinCEN regarding a business and the individuals who control that business or who own, directly or indirectly, at least 25% of that business.  BOI reports are filed electronically through FinCEN’s website.  The information collected in BOI reports will be maintained in a registry for use principally by law enforcement, other government agencies, and financial institutions. The public will not have access to that registry.  FinCEN maintains a website, https://www.fincen.gov/boi, that provides information regarding BOI reporting requirements.

BOI reporting requirements aim to increase transparency and prevent financial crimes such as money laundering, tax evasion, and corruption. It is all part of a broader effort to strengthen the integrity of financial systems by ensuring that the true owners of companies are identifiable.

UPDATE: On December 26, 2024, the U.S. Court of Appeals for the Fifth Circuit issued a decision reinstating the injunction against enforcement of reporting requirements. At this time, companies are not required to file Beneficial Ownership information with FINCEN, however, voluntary submission is still available.

Businesses Required to File a BOI Report

The following types of business entities may be required to file a BOI report:

  • A corporation, limited liability company, or other type of business entity created in the U.S. by filing a document with a state secretary of state or any similar office under the law of a state or Indian tribe; or
  • A foreign company that has registered to do business in any U.S. state or Indian tribe.

Exemptions

Although most small businesses that fall into the categories listed above are required to file a BOI report, there are 23 types of exemptions from the filing requirement. One notable exemption applies to some businesses that have more than 20 full-time employees and have annual gross receipts in excess of $5,000,000. Important information regarding exemptions can be found on FinCEN’s website, https://www.fincen.gov/boi.

Most of these exemptions are for entities such as financial institutions, insurance companies, securities brokers, and other types of entities that are already required to report ownership information to a governmental authority.

Other notable exemptions include the following entities:

  • Large Operating Companies. Any entity with more than 20 full-time U.S. employees and an operating presence at a physical office in the U.S. that reported more than $5,000,000 in gross receipts on its prior year federal income tax or information return (excluding foreign-source gross receipts).
  • Inactive Entities. Any entity that (1) was in existence on or before January 1, 2020; (2) is not engaged in active business; (3) is not foreign owned; (4) has had no ownership changes in the prior 12 months; (5) has had no transactions greater than $1,000 in the prior 12 months; and (6) does not hold any assets.

Note:  Despite the large number of exemptions, many small businesses will be required to file a BOI report starting in 2024. FinCEN estimates over 32 million companies will file initial reports in 2024 and over 14 million reports (both initial and updated) will be filed annually thereafter.

Observation:  According to FinCEN FAQs, an entity that was created after January 1, 2024, still has a BOI reporting requirement even if it ceased to exist prior to the due date of its initial report. However, after the initial report has been filed, there is no requirement to file a an additional report with FinCEN noting that the entity ceases to exist.

Information Required

The BOI report requires four pieces of information regarding the business that is filing the report:

  • name
  • address
  • tax ID
  • state of formation

The BOI report also requires four pieces of information regarding each individual who has a sufficient level of ownership or control over the business:

  • name
  • residence address
  • date of birth
  • the unique identifying number of a passport, U.S. driver’s license, or other U.S. government ID, and a copy of that document

A business formed or registered after December 31, 2023, must also provide information regarding certain individuals who were involved in the formation or registration of the business.

Filing Deadlines

The deadline for filing a BOI report depends on when the business was formed:

  • The deadline is January 1, 2025, for businesses formed or registered before January 1, 2024. 
  • The deadline is 90 days after receiving notice of formation for businesses formed or registered during 2024.
  • The deadline is 30 days after receiving notice of formation for businesses formed or registered after December 31, 2024.

After the initial filing is made, there is no requirement to file additional reports periodically, but there is a requirement to file an updated report each time any of the previously reported information changes.  An updated report must be filed within 30 days after a change occurs.

For more information visit https://www.fincen.gov/boi.

This post is shared by Davis & Hodgdon CPAs as a service to our clients, business associates and friends.  Recipients should not act on the information presented without seeking prior professional advice. 

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