Beneficial Ownership Information (BOI) Reporting is on the Horizon
As you may have already heard, there is a new type of information reporting that will be required of businesses: Beneficial Ownership Information (BOI). This requirement was created in 2021, when Congress passed the Corporate Transparency Act.
This new reporting requirement involves submitting information on beneficial owners (those who own or control businesses) to the Financial Crimes Enforcement Network (FinCEN) of the US Department of the Treasury.
New businesses (those that are started in 2024) are required to file a BOI report within 90 days of formation. However, for existing businesses, the required reporting doesn’t kick in until January 1, 2025.
This means that Blumer & Associates can spend 2024 closely watching this system that was just implemented in the current year, and learn about the ins and outs of reporting BOI before our clients are required to submit their reports next year.
A lot related to BOI is new, but here is what we know:
What is the Purpose of this Report?
The purpose is to make it more difficult for criminals, money launderers or other “bad actors” to hide behind shell companies or convoluted ownership structures.
Who Needs to Report:
Many businesses will be required to report information identifying the individuals who own/control the business, either directly or indirectly. Both foreign companies registered to do business in the US and domestic companies will be required to report Beneficial Ownership information to FInCEN.
While there are many exemptions to this requirement (for example, nonprofit organizations), most businesses -corporations, LLCs, or similar entities- organized under the laws of a state will be required to file.
What Must Be Reported:
Identifying information on all Beneficial Owners: full legal name, date of birth, complete current address, identification numbers and the issuing jurisdiction, along with an image of the identifying document (US passport, state-issued driver’s license or ID).
Beneficial owners include anyone who owns or controls at least 25% of a reporting company, or anyone who exercises substantial control over the company regardless of ownership percentage.
When Must It Be Reported:
For businesses that already exist as of January 1, 2024: must file its initial BOI report by January 1, 2025.
For new businesses in 2024: Starting January 1, 2024, any new businesses must file an initial BOI report within 90 days of creation/registration.
For new businesses in 2025 and later: Starting January 1, 2025, any new businesses must file an initial BOI report within 30 days of creation/registration.
Note: willful failure to report Beneficial Owner Information to FinCEN carries steep penalties, fines and potential jail time.
Who Do You Report to:
As mentioned at the beginning of this article, the BOI reports are submitted to FinCen (Financial Crimes Enforcement Network), an arm of the US Treasury Department.
How Do You Submit Your Report:
FinCEN will have an online portal available through which businesses can submit their BOI initial reports, as well as reporting any changes over time in Beneficial Owner names, addresses, ID numbers and other information.
You can find more information on how to file on the FinCEN website at: https://www.fincen.gov/boi
While businesses can file this form directly with FinCEN, they can also consult with their accountants or attorneys to help file this report.
What Challenges Do We Foresee related to BOI Reporting:
While there is no fee for businesses to file online with FinCEN, many business owners will want to opt out of such administrative work and delegate this reporting to their accountants or attorneys. However, the laws which determine who can legally do this work may vary from state to state, so it may be unclear who should file on a business owner’s behalf in any given situation.
Timely updating of BOI information may also be a challenge, as any change in owner information is required to be reported to FinCEN within 30 days of the change. Since the requirement is so new, updating BOIs may not be top of mind for many business owners, and filing themselves on time (or getting the updated information to their accountant or attorney on time) may be a challenge.
Rest assured, we are monitoring the situation and will update our clients on any and all new reporting requirements as they occur.