In 2021 Congress passed the Corporate Transparency Act. One of the outcomes of this legislation is a requirement for small businesses to report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN) beginning in 2024. Per the FinCEN website, the aim of this legislation is to make it difficult for bad actors to use small businesses as a front for illegal activity. Below is additional information regarding the BOI reporting requirements including what companies are required to report their BOI, who is considered a beneficial owner, filing requirement deadlines for newly formed and existing companies, and what and how BOI needs to be reported. Per the FinCEN website, failure to comply with this requirement is considered a felony and could result in financial penalties and prison time.

What companies have to report their beneficial owners?

This new filing requirement applies to two categories of reporting companies: domestic reporting companies and foreign reporting companies. For domestic reporting companies: if the company is a corporation, a limited liability company (LLC) (including single member LLC's), or it was created by filing a document with a secretary of state or any similar office under the law of a State or Indian tribe you may be required to report your BOI. For foreign reporting companies: if the company is registered to do business in any U.S. State or Tribal jurisdiction by filing a document with a secretary of state or similar office it may be considered a reporting company.

There are 23 entity types that qualify for an exemption. Check the 'Small Entity Compliance Guide' (published by the FinCEN) beginning on page 4 for a list of the requirements to be considered an exempt entity (click here for a pdf link to that guide). An entity that qualifies for one of the exemptions listed in that guide is NOT required to submit BOI to the FinCEN.

If the company meets the requirements in the first paragraph and does NOT qualify for one of the exemptions, you are required to report your BOI to the FinCEN.

Below are a few of the organizations exempt from the filing requirements:

• Sole proprietorships that have NOT registered with a secretary of state or similar office

• Tax-exempt entities, including a trust described in paragraph (1) or (2) of section 4947(a) of the Code

• Large entities (more than 20 full time employees with more than $5,000,000 in gross receipts or sales – these are general criteria, with more specific requirements to meet as well)

Who is considered a beneficial owner of a company?

As described in the 'Small Entity Compliance Guide' (beginning on page 16) a beneficial owner is any individual that directly or indirectly owns or controls at least 25 percent of the ownership interests OR exercises substantial control over a reporting company. There are five exceptions to the definition of beneficial owner. For more detailed information on who is considered a beneficial owner and the five exceptions, click here. BOI qualifications begin on page 16.

Note: If a company is formed after January 1, 2024, company applicants (individuals that were responsible for the creation of the reporting company) are required to be reported in addition to their BOI. See the link above beginning on page 32 for additional information regarding company applicants.

Filing requirement deadlines for newly formed and existing companies

For an existing company formed prior to January 1, 2024, its BOI report must be filed by January 1, 2025.

For a company created on or after January 1, 2024 but before January 1, 2025, its report must be filed 90 calendar days after receiving actual or public notice that the company's creation or registration is effective.

For a company created on or after January 1, 2025, its BOI report must be filed 30 calendar days after receiving actual or public notice that the company's creation or registration is effective.

NOTE: Once the initial report is filed, no further filing is required unless there are changes made within the company that affect the previously filed information. If there are changes to previously filed information, the company must report those changes within 30 days.

What and how does BOI need to be reported?

If a company is required to file a BOI report, it must do so electronically through a secure filing system on FinCEN's website. FinCEN's electronic filing system will be available beginning January 1, 2024. For more information on how to submit the required form visit the FinCEN's website for BOI here.

Below is a list of the information that will be required when reporting to the FinCEN:

• Reporting Company Information Required:

  • Full legal name

  • Any trade names or 'doing business as' names

  • Current US address (principal place of business or, if the principal place of business is outside the US, the primary location in the US where the company conducts business)

  • State, Tribal, or foreign jurisdiction of formation (for foreign reporting companies only: State or Tribal jurisdiction of first registration)

  • IRS Taxpayer Identification Number (TIN) (including an Employer Identification Number (EIN))

    • If a foreign reporting company has not been issued a TIN, report a tax identification number issued by a foreign jurisdiction and the name of such jurisdiction

• Beneficial Owner and Company Applicant Information Required:

  • Full legal name

  • Date of birth

  • Complete current address

  • A unique identifying number, issuing jurisdiction, and image of one of the following non-expired documents

    • US Passport

    • State driver's license

    • ID issued by a state, local government, or tribe

    • If an individual does not have any of the preceding documents, foreign passport

If you have any additional questions or would like more information about these new BOI reporting requirements, please let us know! Below are additional resources from the FinCEN concerning BOI. Click on one of the links to navigate to the pdf or website.

• FinCEN BOI webpage (website)

• FinCEN Frequently Asked Questions (website)

• FinCEN Small Entity Compliance Guide for BOI (pdf)

• FinCEN BOI Informational Brochure 508C (pdf)

We look forward to serving you this year!

- Ensign CPA Group