Beneficial Ownership Information (BOI) Reporting

Dear Client,

Beginning on January 1, 2024, many companies in the United States are required to report information about their beneficial owners (i.e., the individuals who ultimately own or control the company). Companies must report the information to the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the Treasury Department, through an electronic filing system. The beneficial ownership information (BOI) reporting requirements are part of the Corporate Transparency Act.

Reporting entities. Generally, any corporation, limited liability company, or any other entity that is created by filing a document with a secretary of state or similar office under state or tribal laws, or is formed under foreign law and registered to do business in the United States by filing a document with a secretary of state or similar office under state or tribal laws, is a reporting company that must disclose information regarding its beneficial owners and its company applicants to FinCEN under the Corporate Transparency Act.

However, there are exclusions for heavily regulated entities that already report such information to other federal agencies, or companies with real business activities that are not perceived to be a high risk for money laundering.

These include, among others:

• “large operating companies”—companies that employ more than 20 full-time employees in the United States, reported more than $5 million in gross receipts or sales in the aggregate on their previous year’s federal tax or information return, and have an operating presence at a physical office in the United States;
• publicly traded companies;
• investment companies, investment advisers, and venture capital fund advisers;
• accounting firms;
• securities brokers, dealers, exchanges, and clearing agencies;
• Commodity Exchange Act registered entities;
• certain pooled investment vehicles;
• tax-exempt organizations, nonexempt charitable trusts, nonexempt split interest trusts, and Section 527 political organizations, and certain entities that assist these entities.

Additionally, the reporting requirements do not apply to an inactive entity. This is any entity that (1) was in existence on or before January 1, 2020; (2) is not engaged in active business; (3) is not owned by a foreign person; (4) has not experienced any ownership change in the preceding 12-month period; (5) has not sent or received any funds greater than $1,000 (directly or through a financial account) in the preceding 12-month period; and (6) does not otherwise hold any assets in the United States or abroad, including an ownership interest in a corporation, limited liability company, or other similar entity.

Beneficial owner. A beneficial owner is an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, either:

• exercises substantial control over the reporting company; or
• owns or controls at least 25 percent of the ownership interests of the reporting company.

However, beneficial owners do not include minor children; nominees, intermediaries, custodians, or agents; employees; inheritors; or creditors.

Company applicant. A company applicant is the individual who files the document with a secretary of state or any similar office under state or Indian tribe law that:

• creates the domestic reporting company, or
• registers the foreign reporting company to do business in the United States.

Further, the individual who is primarily responsible for directing or controlling that filing by another individual is also a company applicant.

Information to be reported. A reporting company must disclose the identity of each beneficial owner of the company and each company applicant. For each individual who is a beneficial owner or a company applicant, the reported information must include:

1. full legal name;
2. date of birth;
3. residential street address; and
4. an identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of identification document.

The reporting company must also provide an image of the identification document used to obtain the identifying number in item four.

Filing deadlines for initial reports. Domestic reporting companies created or registered to do business in the United States and foreign reporting companies registered to do business in the United States before January 1, 2024, must file their initial report with FinCEN no later than January 1, 2025. Newly created or registered companies created or registered to do business in the United States in 2024 have 90 calendar days to file after receiving actual or public notice that their company’s creation or registration is effective.

If your company was created or registered on or after January 1, 2025, it must file its initial beneficial ownership information report within 30 calendar days after receiving actual or public notice that its creation or registration is effective. Additionally, penalties may be imposed for failure to file.

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Please contact our office for more information on the requirements for the beneficial ownership information reporting.