Beneficial Ownership Information (BOI) Reporting
If you own or control a company in the United States, you may have heard of a new requirement to report your Beneficial Ownership Information (BOI) to the government. But what is BOI, why do you have to report it, and how can you do it right? This article will answer these questions and more and provide you with the ultimate guide to BOI reporting.
What is BOI and why do you have to report it?
BOI is the information that identifies the natural persons who ultimately own or control a company. This may include their name, date of birth, address, and identification number. BOI reporting is a new obligation for certain companies created by the Corporate Transparency Act (CTA) of 2021, which is part of the Anti-Money Laundering Act of 2020.
The CTA aims to prevent and combat money laundering, terrorist financing, tax evasion, and other illicit activities by enhancing the transparency of the ownership and control of companies in the U.S.
The CTA requires many corporations, limited liability companies, and other entities created by the filing of a document with a secretary of state or a similar office under the law of a state or Indian tribe, or registered to do business in the U.S., to report their BOI to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.
FinCEN is responsible for collecting, analyzing, and sharing financial intelligence to combat financial crimes. FinCEN will maintain a secure and confidential database of BOI reports, which will only be accessible to authorized users, such as law enforcement agencies, financial institutions, and federal functional regulators.
Which companies must report BOI, and which are exempt?
Not all companies have to report BOI to FinCEN. The CTA provides a list of 23 exempted entities, which include, but are not limited to, the following:
- Companies that are already subject to supervision or regulation by federal or state authorities, such as banks, credit unions, insurance companies, broker-dealers, investment advisers, public accounting firms, public utilities, and registered charities.
- Companies that have a physical presence in the U.S., employ more than 20 full-time employees in the U.S., file income tax returns in the U.S. demonstrating more than $5 million in gross receipts or sales, and are not owned or controlled by a foreign person or entity.
- Companies that are owned or controlled by an exempt entity, such as a subsidiary of a bank or a charity.
- Companies that are dormant, meaning they have not generated any income or revenue, engaged in any business activity, or operated any bank account for at least one year.
If your company does not fall into any of the exempt categories, you will have to report your BOI to FinCEN, unless you qualify for an exemption based on your specific circumstances. You can find more information about the exemptions and how to apply for them on FinCEN’s website.
Who is a beneficial owner and what information do you have to report?
A beneficial owner is a natural person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, meets one or more of the following criteria:
- Exercises substantial control over a reporting company, meaning they have the power to make important decisions or direct the activities of the company, such as appointing or removing directors, approving mergers or acquisitions, or changing the company’s bylaws or articles of incorporation.
- Owns 25% or more of the equity interests of a reporting company, meaning they have a direct or indirect ownership stake in the company, such as shares, units, or membership interests.
- Receives substantial economic benefits from the assets of a reporting company, meaning they have a direct or indirect entitlement to the income or profits of the company, such as dividends, distributions, or interest payments.
There are some exceptions to the definition of a beneficial owner, which include, but are not limited to, the following:
- A minor child if their parent or guardian is reported as a beneficial owner.
- A nominee, intermediary, custodian, or agent acting on behalf of another person or entity.
- An employee or contractor of a reporting company, if they do not meet any of the other criteria.
- A creditor or lender of a reporting company unless they meet any of the other criteria.
If your company has one or more beneficial owners, you will have to report the following information about each of them to FinCEN:
- Their full legal name
- Their date of birth
- Their current residential or business street address
- Their unique identifying number from an acceptable identification document, such as a passport, driver’s license, or state identification card, along with an image of that document
- Their FinCEN identifier, if they have one, or a request for one if they do not have one
A FinCEN identifier is a unique number assigned by FinCEN to a beneficial owner or an applicant, which can be used to report or update BOI without providing other identifying information. You can request a FinCEN identifier for yourself or your beneficial owners when you file your initial or updated BOI report, or separately through FinCEN’s website.
When and how do you have to report BOI to FinCEN?
The deadline for filing your initial BOI report to FinCEN depends on when your company was formed, incorporated, or registered in the U.S.
- Companies formed or registered before January 1, 2024, are granted until January 1, 2025, to report BOI.
- Companies created or registered on or after January 1, 2024, are required to report BOI within 30 days of receiving notice of creation or registration.
If you need help submitting your BOI, you can contact my office at 202-618-1295 or, if you are my bookkeeping client, you can directly pay HERE for me to start working on your file, getting ready to submit on Jan. 1, 2024.
Frequently Asked Questions
- What is beneficial ownership information reporting?
Beneficial ownership information reporting is a new requirement for certain companies in the U.S. to report the information that identifies the natural persons who ultimately own or control them to the Financial Crimes Enforcement Network (FinCEN).
- How do I get a beneficial owner report?
You can get a beneficial owner report by filing an electronic form with FinCEN through its website, providing the required information about your company and its beneficial owners, and receiving a confirmation of receipt from FinCEN.
- What is included in beneficial ownership?
Beneficial ownership includes the name, date of birth, address, and identification number of any natural person who, directly or indirectly, either exercises substantial control over a company, owns 25% or more of the equity interests of a company, or receives substantial economic benefits from the assets of a company.
- What is disclosure of beneficial ownership?
Disclosure of beneficial ownership is the process of making the beneficial ownership information of a company available to authorized users, such as law enforcement agencies, financial institutions, and federal functional regulators, for the purposes of preventing and combating financial crimes and enhancing transparency and accountability in the corporate sector.
- Why is beneficial ownership information important?
Beneficial ownership information is important because it can help identify and verify the true owners and controllers of a company, and reveal any potential links or risks associated with money laundering, terrorist financing, tax evasion, and other illicit activities.
- Why is beneficial ownership disclosure important?
Beneficial ownership disclosure is important because it can facilitate the access and sharing of beneficial ownership information among authorized users, and improve the efficiency and effectiveness of their investigations, compliance, and supervision activities.
