Beneficial Ownership Information Reporting

The beneficial ownership information reporting requirements dictated by the 2021 Corporate Transparency Act became effective January 1, 2024. Under these new rules a domestic corporation, limited liability company (LLC), including a single member LLC (disregarded for tax purposes), limited partnership, business trust, or an entity created by filing documents with a Secretary of State’s office or similar office under the law of a state or Indian tribe must report specified information about certain owners and officers to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

 

Certain entities are exempt from the beneficial ownership information reporting requirements. While sections 1.1 and 1.2 of the BOI Small Compliance Guide provide guidance on what is a “reporting company,” it is important that an entity review the qualifications carefully before concluding it is exempt.

 

Who is a beneficial owner?

 

The definition of a beneficial owner is expansive and includes:

 

  • An owner whose ownership interest in an entity, either directly or indirectly, is greater than 25%; or
  • An owner who exercises substantial control over a reporting entity, without regard to ownership interest.

A beneficial owner can also encompass senior officers and others with involvement in significant business decisions, including board members. In consideration of the steep fines associated with noncompliance, entities may choose to proceed with caution by including all individuals who could be considered a beneficial owner either through business ownership or business impact.

 

What information must be reported?

 

In its initial report, the reporting company must provide information both about itself and its beneficial owners. As such, it is imperative that an entity be diligent in maintaining and reporting current information pertaining to owners. The reporting company must provide the following information about itself:

 

  • Full legal name;
  • Any of the company’s trade or “doing business as” names;
  • Complete current address (if principal place of business is outside the U.S., the street address of the primary location in the U.S. where the reporting company conducts business);
  • The state, tribal, or foreign jurisdiction where the company was formed;
  • For a foreign reporting company, the state or tribal jurisdiction where the company first registered; and
  • The company’s taxpayer identification number (TIN), including an EIN (if the foreign reporting company has not been issued a U.S. TIN, a TIN issued by the foreign jurisdiction and the name of the foreign jurisdiction. (Treas. Regs. 1010.380(b))

The company must also report the following information for its beneficial owners and, for entities formed after 2023 only, for its company applicant as well:

 

  • Full legal name and date of birth
  • Complete current residential address (if the company is a business, the business address of the company applicant can be provided);
  • A unique identifying number and the issuing jurisdiction from one of the following nonexpired documents issued to the individual:
    • U.S. passport
    • State, local, or government of Indian tribe identification card;
    • State driver’s license; or
    • If the individual does not have any of the above, a foreign passport
    • An image of one of the nonexpired documents listed above is also required.

A corrected report must be filed with FinCEN if there is any change or inaccuracies in the information reported, or the sale or transfer of a beneficial ownership interest, within 30 days of the occurrence.  A penalty for failing to comply with the beneficial ownership reporting requirements will not be imposed if the corrected report is filed within 90 calendar days after the date the inaccurate report was filed. In other words, should a beneficial owner experience a change or reporting error in any one of the following, an entity must report the change to FinCEN and provide any required images.

 

  • Change in ownership interest;
  • Change of address;
  • Change of name;
  • Issuance of a new passport number due to replacement or renewal; and/or
  • Renewal of a driver’s license

When must the report be filed?

 

Initial reporting for entities formed in 2024 and after

 

For entities formed in 2024, the initial report is required to be filed within 90 days of the earlier of the date on which:

 

  • It receives actual notice that its creation has become effective or that it is registered to do business; or
  • The Secretary of State provides public notice that the reporting company has been created or registered to do business.

For entities formed in and after 2025, the initial reporting deadline decreases to 30 days from the formation date of the entity.

 

Entities formed prior to 2024

 

For entities in existence prior to January 1, 2024, the reporting deadline is on or before January 1, 2025.

 

How to file the report?

 

Information regarding the Beneficial Ownership Information Report (BOIR) filing methods is available on the FinCEN website.

 

Detailed instructions on completing the report are also available on the FinCEN BOIR Help & Resources page.

 

What are the penalties for noncompliance?

 

Penalties will be imposed for the conscious failure to report the required information and/or timely report changes in information. Such penalties can be imposed upon beneficial owners, the entity itself, and/or the individual who completed the report. Infractions can result in fines ranging up to $500 per day until a violation is rectified. In the event noncompliance results in criminal charges, the penalty increases to up to $10,000 and/or two years imprisonment.

 

Safe Harbor

 

If an inaccurate report is filed by a reporting company or person, penalties will not be imposed provided a report correcting the inaccurate information is voluntarily submitted within 90 days of the deadline for the original report.

 

For more clarification or information, review the FAQ page on the FinCEN website, consult your legal advisor, and/or consult your certified tax advisor.

 

Authors:

Lindsay Reynolds, Tax Manager

Dyan Cole, Director of Operations

Spiegel Accountancy

 

 

Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.